Insurance Journal quoted Julie Drenner, Texas director for The Heartland Institute’s Center on Finance, Insurance and Real Estate, in a piece on proposed rate hikes set to be considered by the Texas Windstorm Insurance Association.
As we reported here in Drenner’s April 25 Letter from Austin piece, TWIA’s board of directors has received a recommendation from its actuarial committee for a 4.7% overall rate increase, as well as for initiating a process to more closely tie rates to territorial risks. The state-run insurer is bound by statute from charging policyholders premium rates that vary by more than 8% for the same coverage.
TWIA currently writes roughly 57% of the windstorm coverage in Texas’ 14 “Tier 1” coastal counties, up from 17.9% in 2000. The Texas Department of Insurance, which placed TWIA under administrative oversight early last year, would still have to approve any rate increases before TWIA could implement them. Earlier this year, Texas Insurance Commissioner Eleanor Kitzman put forth a proposal to hire consultants to reduce the state-backed insurer’s exposure and improve service to policyholders.
According to Insurance Journal, TDI would like to see TWIA’s policy applications updated to include questions gathering “information about any additional insurance and limits for the applicant’s property; information about the property’s flood carrier and flood insurance limits; and for renewal applications, to determine whether any new structures have been added to the property during the policy year.” The magazine reports:
The Heartland Institute, a free-market think tank, has called on the TWIA board to adopt the actuarial committee’s proposal regarding the rate increase. The Institute noted that an actuarial analysis conducted on TWIA’s behalf by Merlinos and Associates found that if the state-run insurer doesn’t raise rates, there is a 27 percent chance it would not be able to cover all of its liabilities during the 2012 hurricane season.
“Originally an insurer-of-last-resort, TWIA has seen its market share in the 14 coastal counties jump from less than 20 percent to nearly 60 percent over the past decade. Risk-based rates are an essential first step to bring down the rolls of TWIA policyholders and to protect taxpayers from the consequences of a TWIA shortfall,” stated Julie Drenner, Texas director of The Heartland Institute.