Legislators Take Up Windstorm Insurance Reform Bills

Legislators, coastal leaders and insurance executives don't see eye to eye about how to reform the Texas Windstorm Insurance Association, but they agreed Tuesday morning that big changes are necessary if the association and its policyholders are to survive another storm season.

The Senate Business and Commerce Committee heard testimony on four bills that aim to reform the agency, which is still struggling to recover from claims and lawsuits related to 2008's Hurricane Ike. TWIA’s current liabilities exceed its assets by $183 million.

"The facts are, TWIA is totally upside down," said state Sen. Larry Taylor, R-Friendswood, who presented three TWIA bills to a packed hearing room. "We've got a storm season that starts June 1, and we've got an organization that can't handle a major storm or even a minor storm."

Under Taylor’s Senate Bill 1700, a new funding structure would allow TWIA to raise up to $4 billion in the first year through a tiered system that includes reinsurance purchases and other means, he said.

His other two bills, SB 1701 and SB 1702, deal with funding for the Catastrophe Reserve Trust Fund and inspection requirements for insured coastal property, respectively.

Taylor said that his bills would allow TWIA to start anew, though he agreed that there must be a mechanism in place to continue to pay off outstanding Hurricane Ike claims. 

He suggested that putting TWIA into receivership, essentially declaring the agency bankrupt, might be one way to resolve lingering claims. Texas Insurance Commissioner Eleanor Kitzman recently proposed doing so, though the TWIA board tabled a vote on that plan at its Monday meeting. 

Many of the coastal officials who spoke at Tuesday's committee hearing also addressed the TWIA board Monday to speak against the idea of receivership. 

"We think it’s a boneheaded idea," said Foster Edwards, the president of the Corpus Christi Chamber of Commerce.

Another measure addressed was SB 1089, filed by Sen. Juan "Chuy" Hinojosa, D-McAllen, which aims to help restore TWIA reserve funds knocked out by Ike, bolster residential construction standards and reform the funding model for TWIA, among other reforms.

Beaman Floyd, the director of the Texas Coalition for Affordable Insurance Solutions, said he has problems with both SB 1089 and SB 1700 but sees promising solutions within both. For example, he said, SB 1089 creates concerns about what the law might trigger if the Catastrophe Reserve Trust Fund falls below a certain level. Both address the need to stabilize core funding, he said, which should be included in any final bill.

"We look forward to working with you to synthesize these bills and get something that would work for the [insurance] marketplace," Floyd said.

Rate increases must be part of any broad reform plan for the agency, said Sen. John Carona, R-Dallas, the committee chairman. He filed Senate Bill 18, which the committee heard earlier in March, which aims to reform TWIA and Texas Fair Plan operations.

"I hear most often 'Don’t raise my rates,'" Carona said Tuesday. "We recognize that other parts of the state are going to have to contribute to this, but other parts of the state aren’t going to accept paying the coast’s bill if the coast doesn’t get its rates up, too."

Coastal leaders and legislators seemed to agree that rate increases would be necessary but cautioned against hiking up rates too much in a mostly blue-collar area.

Among those raising concerns was Charlie Zahn, the head of the Coastal Windstorm Task Force, a coalition of coastal leaders dedicated to protecting coastal residents throughout the TWIA reform process. Zahn said he believes continued work on the various TWIA bills is necessary to come up with a complex, successful plan that "will make insurance available to all people who live and work on the Texas coast and provide a resource to handle claims in the future if we had a catastrophic event. I’m really confident that we’re going to be able to come up with a substitute bill that addresses the thing."

The four bills, as well as Carona's SB 18, remain pending in committee.