Barely a month after the Texas Department of Insurance rejected the Texas Windstorm Insurance Association’s (TWIA) request to increase rates by 10 percent, TWIA’s board announced that it will consider raising rates 5 percent across the board for policy holders. While even the 10 percent rate increase was inadequate, maybe this increase will be enough to move us toward solving current coastal insurance problems and getting private insurers back into the market.
The creation of TWIA has pushed private insurers out of the market, while increasing the amount of exposure for the state. TWIA’s total exposure has increased from $13.2 billion in 2001 to $64.2 billion this year. The cumulative impacts of Hurricane Dolly and Hurricane Ike wiped out TWIA’s finances and the recent legislative fixes are not likely to help – there is concern now that TWIA will not be able to sell the first tier of catastrophe bonds. Texans are still trying to put Galveston back together. Another storm would be catastrophic at this point in time.
Misguided concerns for consumers have led to the current homeowners’ and windstorm insurance regulations that have mishandled pricing, increased risk, and kept private companies from investing capital in Texas. A large, diverse group of policy holders is what spreads the risks and minimizes costs, keeping prices competitive and low. Yet these regulations keep pushing us in the other direction. As Bill Peacock points out in his recent op-ed, “Windstorm Insurance Ruling Shows Legislative Reforms Have Failed,” there is a right way and a wrong way to go about helping consumers.
If TWIA returns to its original intent to serve as the market of last resort – instead of today’s first and best option – private companies will want to return to the Texas coastal market. With the private companies’ return, coastal residents will see competitive, lower prices, and enough money in the market to cover homeowners in the case of another major storm.
– Ryan Brannan