Texas Windstorm Insurer Not Filing Rate Hike for 2020

Texas’ provider of last resort for wind and hail insurance for coastal properties won’t be raising its residential and commercial property rates next year.

The Texas Windstorm Insurance Association (TWIA) said its board of directors voted at its August 6 quarterly meeting not to raise rates. Instead, TWIA said it would submit a 0% annual rate filing for 2020 policies with the Texas Department of Insurance by August 15.

The association is required by state statute to submit an annual rate filing to TDI by that date each year.

The decision not to raise its premium rates comes despite TWIA’s having reported in late July that its Rate Adequacy Analysis for 2019 found current rates are inadequate by 41.7% for residential properties and 50% for commercial properties. That compares with a rate inadequacy of 32% for residential coverage and 37% for commercial coverage reported in 2018.

This was the first year that TWIA accepted public comment in response to its annual Rate Adequacy Analysis. It did so in compliance with legislation passed by the 86th Texas Legislature this year.

TWIA said in making the decision on 2020 rates, the board considered both public comment from stakeholders and the 2019 rate analysis. The association said it expects to reevaluate its rates at a later date when more information is available.

TWIA received more than 1,000 e-mailed comments on both rates and the rate adequacy analysis; more than 80 individuals attended the board meeting in Galveston where an opportunity for public comment was provided.

A group of more than 20 Texas coastal lawmakers sent a letter dated Aug. 1 to TWIA asking the “board to postpone or reject consideration of any proposed rate increase on residential and commercial policyholders.”

In the letter, the lawmakers said “significant legislation” passed this year, particularly Senate Bill 615 and House Bill 1900, would likely have an impact on TWIA’s financial condition going forward. The bills address rate adequacy and transparency, require two legislative committees to inspect and review the association’s funding structure, and implement other changes that “could result in potential savings” to TWIA’s overall administrative and loss operations.

“Given the extensive changes produced by legislation passed by more than two-thirds support of Texas legislators and signed by the Governor, we believe any action to increase policyholder rates at this time is premature and in direct conflict with the will and intent of the members of the Texas Legislature,” the letter states.

In late May, TWIA’s board voted to withdraw a 10% rate hike filed last year that had been subsequently put on hold by Gov. Greg Abbott. The board approved the rate increase in early August 2018, nearly a year after Hurricane Harvey devastated the state in 2017. The increase, if it had been allowed to go forward, would have been effective beginning on Jan. 1 of this year.

While the board declined to vote for a rate increase at its Aug. 6, 2019, meeting, it did approve the filing of a proposal to raise TWIA’s maximum liability limits. TWIA is required to submit proposed inflation adjustments on the maximum liability limits to TDI by Sept. 30 each year. The adjustments are supposed to track the BOECKH Index, which measures changes in construction costs. The limits of liability apply to the maximum amount of coverage a policyholder can purchase from TWIA.

The association filed to raise limits of liability for both residential and commercial properties last year. However, in October 2018, Texas Insurance Commissioner Kent Sullivan declined TWIA’s request.

In doing so, Sullivan said that since 1997, the cumulative adjustments to the maximum liability limits for TWIA policies have greatly exceeded the increases in the weighted average BOECKH Index.