Insurance rates could climb for some Texas coastal homeowners, businesses

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The Texas Windstorm Insurance Association, the state’s insurer of last resort for homes and businesses on the Gulf Coast, will consider raising rates as climate change increases the chances of more severe storms and damages become more costly.

The association’s board of directors is expected to vote on a 10% rate increase for residential and business policyholders at their Aug. 6 meeting. If approved, Texas Insurance Commissioner Cassie Brown would have to sign off on the increase for it to take effect.

Homeowners typically pay $2,300 a year for a TWIA policy. The proposed rate increase would bump their annual insurance premium by $230.

“Our board members are aware of the burden of insurance rates on our policyholders on the coast,” said Aaron Taylor, TWIA’s senior legislative and external affairs specialist. “They also want to make sure that we have the financial sustainability and the financial resources to pay those claims when our policyholders need us.”

Texas lawmakers created TWIA in 1971 to provide insurance to coastal property owners who can’t find coverage through private insurers. The not-for-profit association is essentially a pool of private property and casualty insurers that provide wind and hail insurance to properties in the state’s 14 coastal counties as well as a portion of Harris County, the state’s most populous urban county.

Demand for TWIA coverage has grown in recent years. TWIA had more than 252,000 policies as of the end of March, nearly 37% more than in 2020 — an indication that property owners along the Gulf Coast are finding it increasingly difficult to secure private insurance.

TWIA’s current rates don’t generate enough revenue to cover the association’s “operating expenses and its expected losses from claims,” according to a recent TWIA analysis of those rates. Rates are “less adequate than a year ago” owing to the association’s growing policyholder base as well as higher construction and labor costs to repair damage from storms, the association said. TWIA last raised rates in 2022.

The association is weighing the rate increase as the region recovers from Hurricane Beryl. TWIA had received about 25,000 claims resulting from damage caused by Beryl as of Monday, Taylor said. TWIA’s chief actuary Jim Murphy recently said he expects total claims to exceed $200 million.

State Rep. Todd Hunter, a Corpus Christi Republican, took to social media on Friday to try to rally opposition to the increase.

“It’s a terrible time and it’s terrible economics for coastal residents and businesses,” Hunter said in a video posted Friday to the social media site X.

Texas property owners pay some of the highest insurance premiums in the nation — and those costs have been going up, driven by extreme weather events and rising property values resulting from the state’s robust economic growth. Homeowners’ insurance rates in Texas, grew by more than 23% last year, faster than in any other state, according to an S&P Global analysis.

Lt. Gov. Dan Patrick and House Speaker Dade Phelan have each shown an appetite for the Texas Legislature to rein in the state’s rising insurance costs when lawmakers return to Austin next year.

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