Commissioner Mike Geeslin told legislators the total number of Texas insurance claims from Ike could reach 300,000. That includes those filed with private-sector companies and with the state-chartered Texas Windstorm Insurance Association.
The windstorm insurance fund, the only windstorm insurer for more than a dozen coastal counties, could see its total losses reach $4 billion, while Ike losses in Texas overall could be at least twice that amount, Geeslin said.
Those windstorm fund losses would lead to an estimated drain on the state budget of $400 million per year because insurance companies can seek state tax credits to recoup some of their ballooning payments into the fund.
Rep. Lois Kolkhorst, a Republican on the House budget-writing committee, said it is "a sobering number for all of us to realize how much the state was on the hook for residences and commercial properties along the coast."
The state's role in insuring coastal property should be debated at length by the Legislature, she said.
The Texas Windstorm Insurance Association became the only wind damage insurer for thousands of Texans in 14 counties and part of Harris County because private-sector companies largely pulled out of coastal markets after hurricanes Katrina and Rita in 2005.
The state-chartered fund pays for wind and hail damage but says it does not cover flooding from storm surge, which occurred not just in Galveston but in coastal areas stretching from Freeport to Port Arthur, said Jim Oliver, association general manager. He said each claim will be looked at individually to determine the cause of damage.
Answering questions from lawmakers on the Sunset Advisory Commission, Geeslin said the state insurance department watches insurance companies before and throughout the spring and summer storm season to make sure they have the necessary cash flow to cope with potential losses.
"At this time there are three to four -- like I said, that number will change probably on a monthly basis -- that we are watching very, very closely," he said. The insurance department could move to place a company into rehabilitation or liquidation because of financial problems.
"I'm afraid with the recent turn of events, that that is going to happen," Geeslin said, declining to name the companies under scrutiny.
Like Geeslin, Rep. Carl Isett, chairman of the sunset commission, urged insurance industry representatives at Wednesday's Capitol meeting to work quickly to help policy holders resolve Ike claims.
"Don't add to the anxiety of those that are already hurting," Isett said.
It's too early to say whether property insurance rates are going to skyrocket because of Ike, since companies have catastrophe funds and reinsurance in place to help with losses, Geeslin said. But he said there may be even less willingness to write property policies in some coastal counties now.
"Rates must be justified -- you can't just hit the hysteria button," he said.
As for the state's windstorm association, which has more than 142,000 policies in the six most affected coastal counties, the association's managers imposed a $430 million assessment last week on insurance companies that pay into the fund. That money will help cover claims and trigger the association's reinsurance policy.
More assessments that likely will take the total company assessments up to $1 billion or more are scheduled to occur in the coming weeks as Ike's damage tally rolls in.
The windstorm association already was covering losses from Hurricane Dolly that hit South Texas early in the summer. That storm inflicted far less damage, leading to about 8,000 claims for $280 million in losses.