TWIA Meets To Address Finances
The Texas Windstorm Insurance Association (TWIA) met for the first time this year on June 18 in order to prepare a plan to raise funds and increase efficiency for future storms after the Legislature was unable to approve any reforms to the agency during the recent regular session. Senators and representatives filed different bills in efforts to financially restructure the agency, however none of these bills gathered enough support for a vote on the chamber floor.
The agency is struggling to find sources of income after Hurricane Ike nearly bankrupt the TWIA. Currently the TWIA is still fighting claims of wrongdoing from policyholders who didn’t receive proper payment for damages caused by the storm, and the agency will now have to reveal plans on how it will manage the rebuilding process on top of addressing its financial situation.
The claims from Hurricane Ike have totalled $2.7 billion and the TWIA has gone almost $200 million overbudget paying out policies and litigation around those policies, considering it didn’t have enough to cover even half of the damages caused by the storm. The agency says it should have at least $500 million in its budget for storms and hopes to increase its funding to $3.45 billion this year. This funding would consist of:
- $500 million in the form of a loan
- $1.5 billion from selling bonds
- $1.25 billion from reinsurance
- $200 million from premiums and from the agency’s Catastrophe Reserve Trust Fund
TWIA’s current budget remains a mystery this hurricane season, considering the recent settlement of $135 million with Hurricane Ike homeowners in May 2013. The agency still has 60 outstanding Hurricane Ike lawsuits, with possibly 50 more on the way.
Loans, Bonds and Laws
The loans and bonds the TWIA plans to obtain is a feat much easier said than done. The agency must first get approval from the Texas Department of Insurance in order to take out the $500 million loan. A former insurance commissioner, Eleanor Kitzman, had previously denied the approval of a request for the loan due to insufficient funds. Kitzman’s proposal to declare TWIA bankrupt was rejected at the June 18 meeting to preserve the agency’s credibility. Those fighting for the declaration say that the motion would pause lawsuits, giving the TWIA time to raise funds and build assets.
The newest insurance commissioner, Julia Rathgeber, agreed with this decision, however she also stated that if the TWIA could prove new financial standing, she would reconsider the denial. The agency will meet with Rathgeber on June 21 to try to persuade her to reverse the previous decision in order to advance a request for the loan however, if the TWIA uses the loan money to pay for storm damage, it will have to pay $125 million in interest.
Rathgeber says she wants to work together to provide stability in insurance plans for people living on the coast. “This includes working with coastal delegation to ensure TWIA maintains a stable insurance market.”
Last year TWIA attempted to take its bonds to the stock market however, it ran into some difficulty in selling the bonds because of a tumultuous history with finances.
The TWIA has also been under the radar of certain lawmakers within Texas. On Monday, June 17, the House Insurance Committee questioned TWIA officials regarding allegations that it had lied about its financial standing, failing to include the $135 million settlement with Ike policyholders in its financial statements. The Committee also says that the TWIA failed to follow through with inspections and rebuilding homes according to building codes to reduce the possibility of future damages, as well as failing to follow up on those who had sued the agency for that very purpose– both a huge liability.
Larry Taylor, a Friendswood Republican state senator and insurance agent led the Committee saying, “You never pay for a damage you haven’t seen and then you don’t finalize payments until you see it’s been done. Otherwise, you pay for the same claim over and over again… [it’s] appalling.”
TWIA responded to this claim by agreeing to enforce a requirement that policyholders must have a WP-18 certificate which will guarantee that the home is in current in coding and building standards before it insures the property. This requirement will begin in 2016.
TWIA still claims that if a storm were to hit the coast now, it only has $500 million to pay out claims.