No Easy Solutions to Texas Windstorm Association Solvency

Published September 24, 2012

During the first hearing of Texas’ Joint Seacoast Territory Insurance Committee in September, officials with three different insurance-related agencies unequivocally told lawmakers the state-run Texas Windstorm Insurance Association is not actuarially sound.

While this was not news to anyone in the room, it was noteworthy to see the utter frustration of officials in determining how best to solve the ongoing problem.

Insurance Commissioner Eleanor Kitzman suggested TWIA should use the basic insurance principle of territorial rating to charge policyholders based on their assumed risk. In other words, if homes are situated farther from the coast, their premiums would be lower than premiums for waterfront property that is more at risk from hurricane damage.

Difficulty Attracting Insurers

While agreeing to the necessity of depopulating TWIA, the commissioner said she did not have the tools to encourage alternate insurance carriers into the market. She said she lacked the funding for economic incentives for such private market entry.

Insurance Public Counsel Deeia Beck suggested retrofitting homes to better withstand storm damage, and requiring strict building codes, as the best way to make properties attractive to private insurers. According to her office, the average home would require $2,400 in upgrades to meet the International Residential Code. Claims from buildings meeting code are $7,000 less on average than those that do not meet the stricter construction requirements, she noted.

Although the state does not provide direct financial assistance to residents, the federal government provides funding for retrofitting homes and businesses in the form of Community Development Block Grants and the Weatherization Assistance Program. Though these programs are designed primarily to promote energy efficiency, the upgrades of doors, windows, and roofs serve a dual purpose in protecting structures from wind damage while conserving energy throughout the year.

Julie Drenner ([email protected]) is Texas director of the R Street Institute in Washington, DC. Used with permission from