"Windstorm board discussing the future"

The following is an excerpt from a June 12, 2007 Galveston County Daily News article.

By Laura Elder
June 12, 2007

GALVESTON - What's in store for the state's windstorm insurer of last resort and its policyholders after lawmakers last session couldn't agree on funding solutions for the program?

That's what the nine-member governing board of the Texas Windstorm Insurance Association will begin to sort out today as it meets in Galveston.

The quarterly meeting is open to the public and will cover such topics as reinsurance and, possibly, premium rates.

Reinsurance has long been an issue with consumer advocacy groups because, through it, policyholders pay both their own insurance premium and a sum to cover insurers' potential losses.

The state's Office of Public Insurance Counsel says reinsurance has led to unnecessarily high premium rates.

From 1998 to 2005, the windstorm pool paid reinsurance companies about $215 million in premiums and received nothing back in reimbursements for losses, according to a counsel report.

Lawmakers last month ended Texas' 80th Legislation session without agreeing on a bill that would have increased association funding by about $6 billion through premium increases and bonds.

Without the possibility of bonds, the board likely will turn to reinsurance again this year.

The board is not likely to discuss approaching Texas Insurance Commissioner Mike Geeslin for permission to raise rates, said Jim Oliver, general manager of the association.

Last year, Geeslin approved increases of 7.3 percent for residential policyholders and 11.7 percent for commercial clients.

Had the pool gotten what it wanted, rates would have risen 39 percent for residential policyholders and 47 percent for businesses.

Almost everyone agrees that the windstorm pool, which today is worth $1.03 billion and insures nearly 167,000 policyholders in 14 high-risk coastal counties, is underfunded.

Its potential losses from a 100-year storm, one with a 1 percent chance of striking in any given year, are about $3.3 billion, according to the Texas Department of Insurance.

As insurance companies leave high-risk markets, more coastal consumers are being dumped into the state-created pool.

In the session that ended last month, coastal lawmakers balked at portions of the bill they said would have allowed insurers to base rates on computer models.

State law requires that the windstorm pool use "not less than the most recent 30 years" of actual storm experience and losses, not projections about potential losses, to calculate fair rates.

They also argued that the bill would have put an onerous burden on coastal residents, let insurers off the hook and provide insufficient funding for claims.

But insurers say the association's present funding method could bankrupt some companies if a major storm struck the coast. The association's funding mechanism calls for unlimited assessments on all property insurers in Texas when funds come up short.

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