In a House hearing on Tuesday, the new manager of the Texas Windstorm Insurance Association (TWIA) stated that TWIA has improved and would be able to handle a sizable storm this year. Since TWIA recently bought re-insurance, that is likely true. But, the bill currently moving through the Legislature still does not get to the real problems with TWIA – its rating practices.
The current bill does have some good provisions in it. The bill calls for more transparency, requires audits of claims after catastrophic weather, requires the association to plan beyond the $2.5 billion in place currently, and also changes the name of TWIA. However, while these provisions will help the association, they will not fix its problems.
The only way to fix TWIA is to fix ratings. TWIA’s lower than market rates have evolved the program from the provider of last resort into the primary provider of windstorm insurance along the Texas coast. Ultimately, taxpayers are liable for TWIA’s burgeoning exposure of over $74 billion dollars. TWIA’s exposure rose 1200% since 1993.
As we pointed out in our publication, Next Steps to Reforming Texas Windstorm Insurance, Texas lawmakers should return TWIA to its original purpose of a safety net, a last resort measure. Without doing so, Texas will return to the same problems we currently face.