Grab hold of your wallets, the Texas Windstorm Insurance Association is coming to town. The association recently released actuarial analysis claiming rates are inadequate by 42 percent for residential and 50 percent for commercial policies.
Despite raising rates almost every year for the last 20 years, and despite the Texas Legislature acting to limit costs to ratepayers and passing legislation to study the association’s funding structure, it appears the association wants to raise our rates anyway.
It’s not too late to stop the association from preempting the Legislature, and the Coastal Windstorm Insurance Coalition plans to try to do just that — we need your help.
Any association action to raise rates would preempt legislative intent. Less than two months ago, Gov. Greg Abbott signed into law HB 1900, by state Sen. Larry Taylor and state Rep. Greg Bonnen — historical legislation to help coastal residents struggling to pay for ever-increasing windstorm insurance rates.
HB 1900 prohibits the windstorm association from forcing coastal policy holders to pay for previous years’ losses and excessive reinsurance. HB 1900 also created an interim legislative committee to study and recommend changes to the association’s funding structure.
A large reason the association believes rates are inadequate is because much of the money you pay to it isn’t going to build reserves — it’s paying down old bond debt and purchasing billions in excessive amounts of reinsurance. For example, the association has purchased roughly $2 billion in reinsurance more than the law requires for the 2019 storm season.
HB 1900 now prevents your premium dollars from paying for either. As such, they shouldn’t need to raise your rates.
In fact, the association has already stated this year that rates do not need to be raised. In May, its board voted to rescind a proposed 10 percent increase. In other words, the association said — less than three months ago — that rates should not be raised.
That rate retraction saved the County of Galveston $135,000 and the City of Galveston $65,000 in windstorm insurance renewals alone.
Any action by the association to raise rates now would be premature and contradictory to public policy. To implement legislative action, the Texas Department of Insurance has proposed rule changes, with public comment due July 31. Those rules are months away from being finalized.
Furthermore, the association is now losing business to the private market, so if rates continue to rise, it might have less money to pay off its debt from Hurricane Harvey.
With significant funding reforms just recently becoming law, and more reforms likely coming, it is too early to see how all these changes will impact the association, and therefore, too early to call for raising rates.
We need to meet any potential rate increase head-on and let association leaders know they can’t bully their own policyholders.
Please email the Texas Windstorm Insurance Association and the Texas Department of Insurance your thoughts before noon July 31.
Even better, come testify at the association board meeting in Galveston next week. The meeting will be at the Tremont House Davidson Ballroom at 9 a.m. Tuesday.
See you there!