Heartland Institute Encourages TWIA to Adopt Actuarial Recommendations

Published April 23, 2012

The Heartland Institute today recommended the Texas Windstorm Insurance Association’s board of directors adopt proposals passed April 20 by a TWIA actuarial committee to raise rates by 4.7 percent overall and allow TWIA to use territorial rating in its rate-setting.

According to actuarial analysis conducted on TWIA’s behalf by Merlinos and Associates, 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. The association has $3.79 billion of potential claims-paying resources, including $2.5 billion of post-event bonds authorized by the state legislature, while a 1-in-100-year storm could cause up to $4.8 billion in insured losses.

The following statement from Julie Drenner, Texas director of The Heartland Institute – a free-market think tank – may be used for attribution. For more comments, refer to the contact information below. To book a Heartland guest on your program, please contact Tammy Nash at [email protected] and 312/377-4000. After regular business hours, contact Jim Lakely at [email protected] and 312/731-9364.

“TWIA has now heard from both outside advisors and its own internal actuaries about the need to raise rates and shore up its claims-paying capacity. 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.”

Julie Drenner
Texas Director, Center for Finance, Insurance, and Real Estate
The Heartland Institute
[email protected]

The Heartland Institute is a 28-year-old national nonprofit organization with offices in Chicago, Illinois and Washington, DC. Its mission is to discover, develop, and promote free-market solutions to social and economic problems. For more information, visit our Web site or call 312/377-4000.