Calm Year for Texas Windstorm Agency, but Lawsuits Loom

Published February 12, 2012

With a sigh of relief, the Texas Windstorm Insurance Agency closed out 2011 absent a major hurricane or other severe weather event. Only a hailstorm in January 2011 (which produced more than 8,800 claims) marred a relatively uneventful year for TWIA’s policyholders.

What is noteworthy is the number of new lawsuits brought during the second half of the year relating to storms in 2007 and 2008. More than 780 lawsuits claiming damages from Hurricanes Ike, Dolly, and Humberto were filed between June and December 2011.

This ongoing litigation has cost $60 million so far, with no end in sight. At the time of these storms, there was no law limiting the time a claim could be brought against TWIA, meaning policy holders may continue to bring suit even if they have already been compensated.

Rate Hikes Draw Scrutiny

The concern over high homeowners insurance rates was raised at the quarterly meeting of the state Senate Business and Commerce Committee, as the Texas Department of Insurance has granted rate hikes to several companies.

Insurance Commissioner Eleanor Kitzman explained the state’s enormous size means Texas experiences all weather-related disasters and natural catastrophes, including sinkholes, and has had more Federal Emergency Management Agency declarations in the last six years than any other state. All 254 counties in Texas have been declared in emergency situations at some time during that period.

Ironically, although property values have decreased, rebuilding costs have increased. Loss costs in Texas average $743, just below the national premium average.

Senate Business and Commerce Committee Chairman John Carona (R-Dallas) expressed dissatisfaction with that answer and shot a warning to the industry that if rates did not decrease, more regulation may be in store.

Julie Drenner ([email protected]) is Texas director of The Heartland Institute’s Center on Finance, Insurance, and Real Estate.