The waiting game is over. Talk of the potential for catastrophic hurricane losses to deplete the bank account of the Texas Windstorm Insurance Association is no longer just talk.

Hurricane Ike has drained the fund. Now, TWIA is turning to the last resort in their funding mechanism: unlimited assessments against the state’s insurance companies, who, in return, receive premium tax credits, thus putting the state’s general revenue on the hook for losses above what TWIA’s funding can cover. Before Ike, TWIA’s funding mechanism – made up of assessments against insurers, the state’s Catastrophe Reserve Trust Fund, and reinsurance – could cover just $2.07 billion. Losses are sure to exceed this amount, thus the additional assessments against insurers and corresponding hit to the state treasury.

TWIA’s funding system is broken. When the Legislature convenes in January, a major priority must be to restructure TWIA’s financing. Otherwise, TWIA’s exposure will continue to grow, as will its inability to cover the claims from major storms like Ike.

For background on TWIA and its funding shortfalls, see the Foundation’s windstorm insurance archive.

– Drew Thornley