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.”
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.