Texas Windstorm Insurer: No Rate Change for Now

The board of directors of Texas’ property insurer last resort for wind and hail in the state’s coastal counties voted in August to file a 0% rate change with the Texas Department of Insurance

The Texas Windstorm Insurance Association is required by law to submit a rate filing with TDI every August.

TWIA’s actuarial and underwriting committee in July recommended the 0% rate change.

The board voted in its Aug. 4 quarterly meeting to revisit the issue of rates at an interim meeting to be scheduled before its December quarterly meeting.

TWIA’s annual rate filing, due by Aug. 15 each year, is subject in certain circumstances to review and approval by the insurance commissioner. The statute allows TWIA to make a rate filing with TDI at any time.

The 2020 Rate Adequacy Analysis, prepared by the association’s actuarial staff, indicates that TWIA’s current rates are inadequate by 44 percent for residential coverage and 49 percent for commercial coverage.

The actuarial and underwriting committee was directed to recommend a subsequent rate filing after the completion of an independent study currently underway of TWIA’s rate adequacy and use of hurricane modeling in estimating potential losses in its rate-setting process. The independent study is being performed by the actuarial consulting firm Willis Towers Watson.

TWIA’s staff was also directed to seek no change to the maximum limits of liability in TWIA policies in its required annual filing with TDI.

Rate Challenges

TWIA has struggled for years to set a rate that is appropriate for the risk but pushback from policyholders, as well as coastal business interests and lawmakers, have stymied its efforts.

Private insurers complain that TWIA’s rates are severely insufficient and are an impediment to competition in coastal counties. However, according to the Insurance Council of Texas, private insurers still write 59% of the property policies in Texas coastal areas.

In August 2019, TWIA filed for a 0% rate increase. One of the biggest arguments against a possible rate hike at that time was that the coastal areas hit by Hurricane Harvey in 2017 continue to struggle to rebuild after that devastating storm. TWIA’s board in December 2019 voted instead to assess member insurance companies $90 million based on losses from Hurricane Harvey. That was in addition to the $282 million already assessed and was based on an update to TWIA’s ultimate loss estimate for Hurricane Harvey to $1.7 billion from the previous estimate of $1.61 billion.

In 2018, the association filed for a 10% rate hike, but that filing was put on hold at the request of Gov. Greg Abbott, who wanted the Texas Legislature in 2019 to once again take a look at TWIA’s funding and operating procedures. TWIA ultimately withdrew the filing.