NU Online News Service, March 1, 10:14 a.m.EST

The Texas Department of Insurance (TDI) said that allowing theTexas Windstorm Insurance Association (TWIA) to continue operatingwould be hazardous to the public and the last resort insurer'spolicyholders.

TDI has placed TWIA under administrative oversight, a decisionTDI said is based on information provided to it that suggests anoutside claims adjuster was paid for work that was never done. TWIApaid claims based on this adjuster's recommendations and failed toreport the suspected fraud to TDI when it became aware of thesituation, Insurance Commissioner Mike Geeslin noted in a letter toJim Oliver, general manager of TWIA.

The commissioner's office said TWIA has not addressed issuesfound during a recent financial examination that points to "a lackof adequate controls over accounting, personnel and materialdecisions affecting day-to-day operations."

TWIA must adhere to several requirements to lift theadministrative oversight and allow TDI access to any books, recordsor other TWIA information, Mr. Geeslin's letter states. TWIA mustrun all senior or executive appointments by TDI for approval,submit expenditures to TDI for approval. and TWIA must develop aplan to improve communication with its board, according to theletter.

TWIA has faced scrutiny over its claims handling sinceHurricanes Ike and Dolly in 2008. The storms wiped out the cashTWIA had on hand and depleted the state catastrophe reserve fund.At the very end of the 2009 legislative session, lawmakers passed anew funding structure for the state's insurer of coastal homes thatmight otherwise go uninsured.

Insurers and TWIA are still getting claims from HurricaneIke. Losses from the storm for TWIA were at $1.85 billionat the start of the year and were expected to grow. The associationhas received 92,800 claims from Ike and it was sued 4,800 times.More than 2,500 lawsuits have been settled.

Recently lawmakers grilled TWIA about severance packages, wortha total of $160,000, given to two executives.