Proposal for Higher Texas Windstorm Policy Liability Limits Denied

Texas Insurance Commissioner David Mattax has denied a request by the Texas Windstorm Insurance Association (TWIA) to increase limits of liability for residential and commercial properties it insures along the Texas coast.

TWIA is the insurer of last resort for wind/hail for properties in Texas coastal counties and parts of Harris County.

The association is required by law to propose inflation adjustments to the maximum liability policy limits based on average BOECKH Index factors for measuring construction costs for insurance purposes no later than Sept. 30 of each year.

On Aug. 24, TWIA proposed increases in maximum liability limits for residential and commercial policies to be issued or renewed beginning on Jan. 1, 2016.

TWIA had requested:

• A 1.9 percent increase in liability limits for dwellings, including townhomes, from $1,773,000 to $1,807,000, contents included;
• A 1.9 percent increase, from $374,000 to $381,000, including contents, for apartments and condominiums; and
• A 1.9 percent increase for a commercial building, from $4,424,000 to $4,508,000, including contents.

The current proposals were based on average BOECKH Index factors, according to the commissioner’s order denying the hike in limits. But at an Oct. 8 hearing on TWIA’s proposal, the association’s chief actuary, Jim Murphy, testified that a big jump in TWIA limits of liability for dwellings in previous years — from $435,000 in 2004 to $1,500,000 in 2005 — had been triggered by the unavailability for 2005 of a reinsurance program that TWIA had previously had in place in 2004.

The 2004 to 2005 increase was not based on BOECKH Index factors, but if it had been current maximum liability limits for TWIA policies would be much lower, the order stated.

According to the commissioner’s order, since Jan. 1, 2005, if all years had been adjusted for BOECKH Index factors TWIA liability limits would have increased to:

• $602,000 for dwellings
• $215,000 for apartments and condominiums
• $2,645,000 for commercial buildings.

TWIA’s proposed liability limit adjustment for 2016 had been opposed by the Property Casualty Insurance Association of America. As representative for the PCI, Joe Woods testified at the hearing that TWIA’s residential liability limits are out of line with those for residual markets in states with similar coastal property risks. Dwelling limits in both Florida and Louisiana are lower than those in Texas, he said. Woods also said that an increase in liability limits would negatively impact TWIA’s effort to shift policies to the private market.

A written comment from the Coastal Windstorm Insurance Coalition (CWIC) proposed even higher limits of liability than had been requested by TWIA: $2 million for a dwelling and $5 million for a commercial building.

State Rep. Wayne Faircloth also submitted written comments supporting similar higher limits but said at the very least the limits proposed by TWIA should be approved.

The commissioner found, however, that “TWIA’s proposal to adjust the maximum limits of liability is not necessary at this time,” the order stated.