The Texas insurance pool targeted at hurricane events is looking to restructure, with possible outcomes including allowing state carriers to reinsure a portion of their mandated policies with the private market.
Calling the present condition of the Texas Windstorm Insurance Association (TWIA) “unsustainable,” state insurance commissioner Eleanor Kitzman issued a request for proposal last week for a consultant to help overhaul the program.
“TWIA was supposed to be the market of last resort for the 14 coastal counties that comprise Tier 1, but that is not the case anymore. In 2001, TWIA’s market share was 17.9%. In 2010, it had more than tripled to 57.2% and it continues to grow,” Kitzman said in a statement. “With no other significant source of funding to pay claims, this growth in exposure is an excessive burden on coastal citizens.”
Kitzman added that TWIA would not be able to “effectively manage the explosive growth in claims activity that occurs after a significant tropical storm.” For example, she said that in 2008 TWIA handled 65,000 claims and “was simply overwhelmed.”
“A fundamental restructuring of TWIA is necessary to address these and other operational issues,” Kitzman added
While the RFP for the consultant is still outstanding, Kitzman said possible options for TWIA “include a member reinsurance program in which insurers would be allowed to reinsure some portion of TWIA policies rather than issue their own policies” as well as imposing a fee on carriers that service TWIA.
The insurance commissioner will also for a advisory committee of “stakeholders” in TWIA to provide input into the restructuring process. Kitzman said a preliminary report by the committee and consultant is due by June 1, 2012.
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