Wednesday, June 5, 2013

The Twouble with TWIA


According to a Power Point presentation created by the Texas Department for Insurance Companies, (actually it is called the Texas Department of Insurance):
  • TWIA was created by the Texas Legislature in 1971 to provide windstorm and hail coverage to those who are unable to obtain insurance from the voluntary insurance market.
  • TWIA was created in response to market conditions along the coast after Corpus Christi was hit by Hurricane Celia in 1970, causing $500 million in losses.

And for 30 years, TWIA did what it was intended to do, be the insurance of last resort for coastal property owners. Up until recently TWIA covered only about 6% of properties, as designed, until:


  • The 81st and 82nd Texas Legislatures enacted House Bill (HB) 4409 and HB 3 which changed several aspects of the TWIA governing statute, including the composition of the board, funding structure, eligibility requirements, claims processes, and transparency in operations.  HB 4409 also specified that TWIA is intended to serve as a residual insurer of last resort and not function in a manner as to be a competitor in the private market.  HB 4409 became effective in part June 19, 2009.  HB 3 became effective in part September 28, 2011.

In other words TWIA is now FUBAR. (Fouled Up Beyond All Recognition) on the brink of bankruptcy, and possibly unable to pay future claims. TWIA is now a part of the Special Legislation session called by Governor Perry. Anyone want to bet what is going to happen? (Hint: Coastal homeowners are going to get screwed. Again)

We will discuss this in detail in a later post. Because of our elected officials, TWIA now covers over 70% of coastal properties (will confirm this number) while the free market insurance giants have tuck tail and ran from the coast like cockroaches in the bright light. TWIA is not the last resort, but it is becoming the ONLY resort for homeowners.

According to the graph on page 35 of the presentation, TWIA's total windstorm liability was 16 Billion in 2002 just prior to insurance reform of 2003. Today it is over $74 Billion. Oh, did I mention that our State Senator in the Bay Area sells TWIA contracts and is making a killing.

More on the Twouble with TWIA later.

No comments:

Post a Comment