TWIA, which was created by the state, calls itself the 'insurer of last resort' that offers windstorm and hail insurance to home and commercial property owners who cannot get this type of coverage from private insurance companies due to the risk of catastrophic hurricanes.
Its coverage area includes parts of Harris County east of Highway 146 and 14 first tier coastal counties including Brazoria, Chambers, Galveston, Jefferson, and Matagorda counties.
However, the not-for-profit association said its rate adequacy analysis from this year found that their current rates fall short of what's needed to cover expected losses and expenses. As of last Friday, TWIA received 31,163 claims from Hurricane Beryl and has paid $258.7 million in claims from that hurricane.
According to TWIA, it anticipates Beryl payments will exhaust its Catastrophe Reserve Trust Fund (CRTF), which had a balance of $451.4 million as of June 30. The CRTF is an account that holds leftover funds from previous years used to pay for losses that exceed TWIA premiums, public securities bonds, and other revenues.
As a result, TWIA's board voted in August to raise its policy rates by 10%. However, for the increase to take effect, the Texas Department of Insurance (TDI) must approve the proposal.
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TDI said it received 492 written and in-person comments from community members, elected officials, business associations, chambers of commerce, consumer advocacy groups, local charities, and insurance agents. All but three opposed any rate increase.
"People are leaving places like Galveston because it's not affordable anymore. So we have to go back to the core mission of the TWIA, which is that it has to be affordable," said Nishi Kothari with Brasher Law Firm, an attorney who handles insurance disputes.
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On Monday, the department rejected TWIA's proposal, which would have impacted approximately 250,000 residential and commercial properties along the Texas coast.
A spokesperson for TDI said no further comment would be made and referred ABC13 over to the order written by its commissioner of insurance, Cassie Brown. She wrote that "TDI recognizes that coastal Texans are still recovering from Hurricane Beryl and increases in rates at this time would exacerbate the burdens they are facing," calling the proposal "unjust and unfair."
What could this mean in the long run? Could the Texas Windstorm Insurance Association run out of money?
"This sort of fear and anxiety about TWIA potentially going under, we've just never seen that. It's always been a very reliable, financially stable insurance plan," said Kothari. "Part of it is they pay their agent 16% commissions of the premiums. The private marketplace pays 13%. So one of the things TDI said was, 'Hey. Maybe cut your agent commissions.'"
State lawmakers will have the opportunity to address TWIA's funding structure when the 89th legislative session begins in January.
In a statement to ABC13, a spokesperson for the Texas Windstorm Insurance Association wrote in part, "We look forward to working with lawmakers to address these important issues to ensure that TWIA has the financial capacity to pay claims for our policyholders when they need us."
Emilio Longoria, an associate professor at the South Texas College of Law, said that the costs could be passed on to taxpayers depending on what legislators decide.
"Typically, the biggest funding source is going to be premiums. So the question is, should policyholders be alone in this burden or do we, as a state, want to help ensure that people along the coast have coverage?" Longoria said.
"If there's a shortcoming, TWIA has the ability to take out loans or it could be paid for by residents of Texas through a small increase somewhere, such as a $0.05 on a gas tax," Longoria said.
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