The state-created residual market windstorm insurer needs a major overhaul if Texas is to withstand the economic impact of a Katrina-sized catastrophe, a new report concludes.
The Independent Insurance Agents of Texas released the results of its study yesterday that said resolving the Texas Windstorm Insurance Association crisis and remedying inadequate state laws should be a top priority for lawmakers this legislative session.
A major hurricane, the study found, would have a drastic impact on the Texas coast, which the state counts on for nearly half its income.
The TWIA was created in 1971 to provide windstorm insurance in designated areas of the state for homeowners and businessowners unable to get coverage in the voluntary market.
IIAT President Robert Hempkins said the study provides the legislature with the hard data needed to begin the TWIA restructuring process and encourage coverage from insurance companies.
"The study makes a powerful argument for ending the legislative delay in taking action to remedy inadequate state laws and repair the ailing financial structure of the Texas Windstorm Insurance Association," Mr. Hempkins.
John Marlow, Austin-based assistant vice president for the American Insurance Association, said he agreed with the overall thrust of the report that strong action is needed to be taken, but said it was lacking in specifics.
"We believe that actuarially sound rates along with pre- and post-event bonding are necessary to get TWIA on a sounder footing," he said.
In addition, he hopes the current deficit finance method of an assessment on insurers is changed to direct surcharge in order for carriers to maintain capacity in the state.
He expects lawmakers to come up with a package of reforms sometime by the end of the session in June.
Rep. Craig Eiland, D-Galveston, a former president of the National Conference of Insurance Legislators, said the study underscores just how serious a threat to the state a Katrina-size event would be.
The study asserted that 40 percent of Texas jobs are tied directly to production along the coast and 44 percent of the state's total income is linked to key Gulf Coast sectors.
And if a storm hit the Port of Houston, an even larger percentage of the regional economic activity would be at risk.
The study also said that a mega-catastrophe on the Gulf Coast could result in a loss of $52.2 billion in gross state product, $43.8 billion in personal income and 617,000 jobs.
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