Letter from Austin: TWIA rates still 22% too low

by Julie Drenner on November 16, 2011

The Texas Windstorm Insurance Association’s most recent board meeting featured discussion by board members about the steps that would be required to issue bonds in the future. The Texas Public Finance Authority asked the board to renew its authorization to employ outside consultants and prepare financial reports necessary to have a marketable security structure in place.  New rules are still required for the rating and approval processes, the revenue streams and the repayment of debt. The costs associated with issuing the bonds are approximately $2 million. Though the amount TWIA will issue is still unknown, the mechanics are expected to be in place by mid-January.

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The Joint Committee on Oversight of Windstorm Insurance also met this month to discuss TWIA’s financial health. Current premiums brought in $200 million. However, a hailstorm at the beginning of the year depleted the funds by $100 million. The association’s rates are at least 22% below the amount required for actuarial soundness, according to TWIA staff. At a time when private insurers are raising their rates by 10% and more, TWIA policyholders are only paying 5% more (though the statute does allow for TWIA to request additional increases.)

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Texas House Speaker Joe Straus, R-San Antonio, officially asked the lower chamber to begin a comprehensive review of the entire state’s tax structure, with an emphasis on the underperforming margins tax. Since tax bills originate in the House, the interim committees’ work will largely set the tone for the 2013 session.  Historically, property tax breaks, sales tax exemptions and financial incentives have lured various businesses to the state. However, under the margins tax, companies may still owe taxes even if they are unprofitable.  This hardship coupled with some of the unfair payments among competitors has many small business owners clamoring for a new solution.

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