Fraser's Legislation Modernizing TWIA Adopted by Texas Senate
AUSTIN — Legislation authored by Senator Troy Fraser (R-Horseshoe Bay) that would reform the Texas Windstorm Insurance Association (TWIA) was approved by the Texas Senate on Thursday.
"Currently, TWIA has $68 billion in coverage written along the entire Texas coast and there is zero money in the reserve fund. This exposure is rapidly expanding as more residents and businesses seek windstorm coverage from TWIA," said Fraser. "The state's exposure in TWIA poses an inevitable risk to the General Revenue Fund."
TWIA was created by Texas lawmakers in 1971 to serve as an insurer of "last resort" where windstorm and hail insurance was not readily available. TWIA's current funding structure was developed fifteen years ago, when TWIA had fewer policyholders and significantly less exposure to loss.
TWIA has outgrown itself and potentially endangers each Texas taxpayer in the event of a major storm event. Due to the increased liability exposure, a major storm would not just affect the citizens and business owners on the Texas Coast - every Texan could feel the impact. If a major hurricane hit Texas, TWIA would pay for a certain amount of claims, while the rest of the State would be obligated to cover billions in costs.
"With an empty reserve fund, limited assessment to carriers and ever-increasing liability exposure, this issue can no longer wait for a solution. This legislation reforming TWIA is a very positive step for all the residents of Texas," said Fraser.
The legislation passed by the Texas Senate would add a post-event assessment of up to $400 million to TWIA member insurers in the event losses exceed amounts in the catastrophe reserve fund. This reserve fund currently has a zero balance.
It would also provide TWIA the additional flexibility to issue pre-event or post-event bonds in the amount of $600 million. These bonds could be paid through assessments on a combination of TWIA policy holders and other property and casualty policy holders in Texas. The bill would remove any requirement for automatic rate increases.
"Because TWIA's rate has been insufficient to fund the exposure on the coast, there has been no incentive for insurance carriers to write coverage or for property owners to purchase anything but TWIA coverage," said Fraser. "The state needs to incentivize a better private insurance market along the coast by making TWIA rates comparable to the private market and by providing more information about insurance alternatives."