Independent Insurance Agents of Texas announced it has proposed a set of guiding principles before the Texas Legislature’s Joint Committee on Windstorm Coverage and Budget Impact during a public hearing in Corpus Christi. The committee is exploring solutions for restructuring the state’s windstorm pool to ensure adequate funding to meet catastrophic storm losses and to preserve the state’s general revenue funds.
“IIAT believes these principles will help guide this committee in reaching the best solution for the citizens of Texas,” said David VanDelinder, executive director of IIAT. “Our goal is to secure an affordable and stable insurance marketplace for the Gulf Coast region.”
In invited testimony on behalf of IIAT, Bob Shepard, IIAT director, chairman of the IIAT Windstorm Task Force and chairman of the board of Shepard Walton King Insurance Group in Harlingen, shared the following principles with the joint committee:
1. IIAT advocates that any change in windstorm pool funding or structure should support and encourage the writing of wind insurance by the voluntary market both along the coast and across the state. A voluntary market will work only as long as companies can make a profit over time.
2. Bonds are an appropriate means of funding the Texas Windstorm Insurance Association (TWIA) losses and in building a reserve fund prior to catastrophes. Pre-funding of TWIA losses is an issue IIAT believes must be addressed by whatever plan comes out of this committee.
3. The ultimate costs of hurricanes should be borne to some degree by all policyholders in Texas. It is not reasonable to expect the state, the insurance industry or coastal policyholders alone to bear the entire cost of storms. Mega storms can affect the economy of the entire state.
4. Insurance companies writing insurance in Texas should share in the costs of TWIA windstorm claims through assessments. Changing the assessment formula to include auto insurers, commercial insurance providers and other companies would recognize the benefits these companies realize by writing insurance in one of the largest and healthiest economies in the country.
5. A company should be allowed to recoup excess losses, above some minimum assessments, from policyholders over a period of years. Allowing such recovery of losses above some level of retention would avoid the unlimited losses that insurance companies face under the current funding formula and encourage companies to write property insurance in Texas.
6. Strict enforcement of current building codes is critical to the insurance market on the coast. The effects of Hurricane Katrina provided clear evidence of the need for strong building codes to protect property and people against wind damage. While Texas has adopted a strong building code for coastal property, enforcement is spotty and needs to be improved. Mandatory inspection of new construction, leading to a certificate of compliance, will reduce property losses and save lives.
“Finally, IIAT would like to lend its support to the effort to gain a tax exempt status for the windstorm pool. IIAT believes that any changes in the pool structure that lead to tax exemption should be made,” Shepard concluded.