Windstorm insurance could rise 10 percent along coast

HARLINGEN — Hurricane Harvey is now hitting Cameron and Willacy counties.

The Texas Windstorm Insurance Association has proposed a 10 percent hike in what are known as windstorm policies eligible only to residents of 14 coastal counties, including these two.

If approved by the Texas Commissioner of Insurance — the deadline for a decision is mid-October — the average windstorm policy for coastal customers will rise from $1,589 a year to $1,745 in 2019.

“TWIA is the backstop for folks who are either declined by a regular company or they can’t get the coverage they want through a regular company,” said Jerry Hagins, a spokesperson for the Texas Department of Insurance.

So it’s like flood insurance?

“It is very similar,” he added. “A lot of folks will have three policies. In addition to their homeowners, they’ll have a TWIA policy and a flood policy through FEMA, the National Flood Insurance Program.”

Coastal insurance

TWIA (pronounced TWEE-uh) is not a state agency. It was formed by the Texas Legislature in 1971 because many insurance firms offering homeowners policies were no longer covering wind and hail damage associated with tropical storms or hurricanes along the gulf coast.

TWIA provides insurance to pay for storm damages along the Texas coast for its 213,278 policy-holders. Of those, 13,376 windstorm policies are held by Cameron County residents, and 412 by Willacy County residents.

As of March 31, TWIA expects to pay out $1.61 billion to policy-holders for damages from Hurricane Harvey, which last August delivered $125 billion in total damages when it made landfall. That ties Harvey with Hurricane Katrina as the costliest U.S. hurricanes ever.

Total property limits insured by TWIA as of June 30 are $61.6 billion, with just over half of those dollars concentrated in the counties of Galveston ($20 billion) and Nueces ($11.8 billion).

Cameron County is fifth-highest in the list with total property limits insured to the tune of $3.5 billion, which is 5.7 percent of the TWIA total. Willacy County is 13th-highest at $98 million, which is 0.16 percent of TWIA’s total insured property.

Underfunded?

This year’s TWIA funding pool stands at $4.6 billion.

“Texas law requires TWIA rates to be sufficient to sustain projected (or future) losses and expenses,” Jennifer Armstrong, TWIA vice president for communications and legislative affairs, said via email.

Armstrong said the actuarial staff annually reviews actual, anticipated and potential property insurance outlays using past tropical storm events and computer modeling of damage from future storms.

She says TWIA is significantly underfunded.

“Information prepared by actuarial staff based on their review this year found that TWIA’s rates are currently inadequate by 32.2 percent for residential policies, and 37.3 percent for commercial policies,” she said. “Rates were deemed to be inadequate by 28 percent the previous year.”

The protesters

Not everybody is onboard with the rate increase — any rate increase.

Coastal Bend United, a network of seven regional chambers of commerce, has teamed with the San Patricio Economic Development Corp. and Corpus Christi Regional Economic Development Corp. to oppose a rate increase they characterize as a gross imposition on a region struggling to deal with damage from Harvey.

“It is insensitive and unnecessarily cruel to dump a significant premium rate increase on these policy-holders while they continue to rebuild their lives,” reported the Corpus Christi Caller-Times, quoting a petition against the rate hike which now has around 20,000 signatures. “TWIA must explore any and all possible alternatives to a premium rate increase given the gravity of economic conditions in Hurricane Harvey impacted communities.”

A statement on the United Corpus Christi Chamber of Commerce website notes that in the Coastal Bend area 4,800 businesses with $2.6 billion in annual revenues were impacted by the landfall of Hurricane Harvey. Up to 40 percent of businesses in some areas are no longer operating, chamber officials say.

The statement also claims raising windstorm insurance rates will disqualify many first-time home buyers who won’t qualify under the federal income guideline rules. Other homeowners, the chamber says, could be pushed into default on their mortgages due to the higher payments.

Regionally, the chamber says, it would make the area less attractive to potential employers seeking to locate to the area due to the added expense for workers.

Last Monday, a rally against the rate hike was held in Aransas Pass. Attempts to contact some of the people at the protest were unsuccessful.

Blame Harvey

Armstrong said for 2018, before Harvey, TWIA was granted a 5 percent increase. But she said the board requested no rate increase for 2017.

Harvey has changed everything.

“Rates are set by the TWIA board of directors and subject to review by the Texas Department of Insurance,” Armstrong said. “We cannot speak for the board related to their decision to propose a rate increase for 2019.

“However, the board deliberated at length and certainly did not take this vote lightly,” she added. “They took into account input from coastal communities and other stakeholders, as well as the actuarial indications showing the inadequacy of our rates.”

Texas Insurance Commissioner Kent Sullivan has until mid-October to approve or reject the TWIA rate increase.

“If he were to disapprove the increase, he would be required to provide in writing his reason and the criteria that TWIA must meet to obtain approval,” Armstrong said. “We will await the commissioner’s decision to that end.”