AUSTIN — A bill that would significantly change the Texas Windstorm Insurance Association by requiring more involvement from private insurers could be voted on by the Senate this week.

Senate Bill 1700, written by Sen. Larry Taylor, R-Friendswood, was voted out of the Senate’s Business and Commerce Committee on Tuesday. The bill is the first piece of windstorm legislation to make it out of the committee level this session and has taken a significantly different form than when it was first introduced.

“This is a major, major bill,” said Seth Chandler, a professor of insurance law at the University of Houston. “If it is passed into law, it really reworks the way insurance is going to be handled.”

Exposure reduction

The bill, which would rename the association the Texas Residual Insurance Plan, would keep in place the current stacked funding method for paying claims after a major storm, starting with reserve funds, then bonds and then an assessment of private insurers.

The bill also includes a proposal to reduce the size of the association through an “exposure reduction plan.” It calls for the association to reduce its overall exposure by 20 percent by 2016, and ultimately by 60 percent by 2024.

To do that, the bill proposes a $200 million assessment every two years that will be spread out between private insurers. The amount each insurer would pay to that assessment would be determined by how much it has helped reduce the association’s risk. The greater the reduction, the smaller the assessment.

Chandler said the bill in its current form could be seen as a victory for coastal groups who fear rate hikes or abandonment by the insurance industry. But he said he wasn’t sure whether the industry would see the $200 million assessment as a carrot or a stick.

“It does it by beating them on the head,” Chandler said.

The bill also reorganizes the association board to include insurance representatives, a property and casualty agent, an engineer with experience in coastal design and construction and a representative from the financial services sector. The board would also include private citizens from the northern, central and southern parts of the Texas Coast.

A ‘new beginning’

In a news release Tuesday night, Taylor said the bill was amended after “extensive negotiations” between affected parties.

“As we all know, TWIA cannot continue down the current unsustainable path and still expect to adequately fund future losses,” Taylor said. “This legislation marks a ‘new beginning’ for residents of the Texas Gulf Coast, and I’m thankful for the input and support of all those involved in the reform effort.”

The bill does not include any plans for assigned risks or territorial ratings — features that coastal advocates have fought against, saying such a move would increase premium rates paid in coastal counties. Nor does it address any issues related to litigation.

‘The positive approach’

Local windstorm advocates said Tuesday that even though the bill doesn’t address all the long-term issues, it was a positive step toward enacting some of the changes that have been lobbied for during the past 18 months.

“They’re bringing in the positive approach to making things better,” Lee Otis Zapp Jr., the chairman of the Coastal Windstorm Insurance Coalition, said of the reduction plan. “There’s still several places where adjustments can be made.”

The bill can now be placed on the Senate calendar, which will put it up for a vote, possibly as early as Thursday. It must receive 16 votes in the Senate before it can be sent to the House of Representatives, where windstorm legislation has stalled completely.

As the final day of the legislative session approaches, a bill getting out of the committee stage is significant. Bills that are left pending in committee become increasingly less likely to pass through the legislature as May 27 draws nearer. Even making it to the Senate is only a small step, Zapp said.

If a windstorm bill is not passed this session, it will leave the association in a precarious position, Zapp said.

“That leaves us where we are, and that’s not very good shape,” Zapp said.

Hurricane season begins June 1.

Contact reporter John Wayne Ferguson at 409-683-5226 or

(1) comment

Marc Edelman

I still can't understand why the TWIAcan't be spread across the state. There perils across the state that involve wind everywhere in Texas and having 10 million participants spreads the risk around which is what insurance is supposed to do. The Gulf Coast is an important part of the total Texas economy. Without the Gulf Coast, the economies of other inland cities would be much different. A plan that only spreads the risk among a few counties will eventually fail again.

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