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Below is the HillCo client report from the September 9 Joint Hearing of the House Insurance and House Land & Resource Management Committees.

The committees met to examine opportunities to improve the resiliency of the Texas coast to withstand tropical storms; study strategies to incentivize and encourage hazard mitigation, and consider the current state of building codes and how they might more effectively protect property and reduce losses; and examine the proper role of insurance in protecting the Texas coast. Coordinate as necessary with the joint interim committee created by HB 3459 (83R).
 
 
Jorge Ramirez, Director of Disaster Recovery, General Land Office (GLO)

  • GLO is conducting an infrastructure resiliency study
    • Assessing critical infrastructure in coastal counties
  • Meeting with COGs, elected officials and emergency management agencies
  • Developing a risk matrix that weighs the likelihood of damage to critical infrastructure with regard to vulnerability and consequence to the community
  • Each community should have a list of priority projects for infrastructure that needs to be repaired in case of storm impact
  • Chairman Joe Deshotel asked if the prioritization is for pre-storm mitigation or post-storm repairs
    • It could be both; if the risk to assets are identified and the funds are available they could be built stronger to withstand future storms
  • Deshotel noted that homes are still being rebuilt from Hurricane Ike; that is a problem; need to streamline procedures for post-storm recovery
    • GLO is working to streamline the programs right now; also developing programs to help with post-storm recovery
    • Working with FEMA on a data warehouse to gather information from 14 different agencies to ensure there is less duplication when storm victims are trying to apply for assistance
  • Rep. Craig Eiland asks if the result of this could be that certain cities may not be eligible for FEMA funding after a storm because of pre-storm knowledge of risk
    • Do not think so; not going to identify vulnerability of individual structures, just whether they are in a vulnerable location
  • Rep. Armando Walle asked if there is a sense of urgency; some of these reports are taking a long time to complete
    • The report is being done in stages; some have already been completed
  • Walle asked what the legislature can do to help
    • If these programs could become sustainable it would help reduce the time it takes to implement them after a storm

 
Helen Young, Deputy Commissioner of Coastal Resources, GLO

  • Coastal management program is federally approved by NOAA
  • Natural defenses to storms such as dunes are constantly being threatened by erosion, growth in populations, sea level rise and storms themselves
  • Through better land and water resource strategies and better preparation and response can help to protect the residents and economies of coastal communities
  • There are three grant programs to help with coastal erosion managed by the GLO; about $15 million in state funding and over $100 million in federal funding are allocated through these programs
  • Texas open beaches act and dune protection act require cities to have beach access, dune protection and erosion response plans to mitigate damage to dunes and reduce public expenditures on dune restoration
  • GLO also helps with coastal construction by ensuring construction causes minimal impact to the coast; certain permits or certificates are required based on their proximity to beaches and dunes; if dunes are adversely impacted, 1 to 1 mitigation is required
  • GLO takes part in coastal planning to assist in resiliency education for decision makers and planners

 
Sam Brody, Director, Center for Texas Beaches and Shores

  • Texas is not in good shape as far as storm resiliency goes
  • In any given year, going back to 1970, Texas is the poster child for impacts to the coast from storms and flooding
  • Texas has the highest number of casualties from flooding and has twice as many as the second highest state, California
  • One big problem is that Texas is adding quite a bit of pavement which decreases resilience
  • Wetlands can help buffer and mitigate the impact of floods and must be protected
  • Elevation of buildings is a good way to increase resilience as well

 
Tim Reinhold, Insurance Institute for Business and Home Safety

  • For obvious reasons, older homes have the most claims after storm situations
  • When studying claims, it is easy to see when building codes were fortified in an area based on the number of insurance claims and when the homes were built
  • A large majority of payouts are relative to roof cover or roof damage and other problems with water getting into a home
  • There are many options for retrofitting homes that can increase their wind resistance; mostly with roofing
  • Sealing the roof deck and properly attaching roof sheathing on any home can provide 60-70% of the benefit of having a new home from an insurance standpoint

 
Joe Woods, Property and Casualty Insurers Association of America

  • The insurance industry is very interested in and very supportive of building codes
  • The TWIA wind code is a good wind code; the market is doing a good job of enforcing the code
  • Texas has not updated the statewide code in a number of years and that needs to be done
  • Texas is in the bottom two or three in rankings of statewide building codes and enforcement of that code
  • Because of all the exceptions to rules in the Texas code it is very large and leaves holes for builders
  • Would like to see a better enforcement mechanism for building codes across the state
  • Insurance companies currently offer premium reductions if a person can show their house was built to the wind code
  • Residual markets such as TWIA take the warning mechanism out of insurance for high-risk homes; private insurance cost is a warning that a home has a high likelihood of damage and may convince a person not to build on sand or near the coast
  • The insurance industry opposes mandatory premium reductions

 
Jim Murphy, Actuary, TWIA

  • Compliance with applicable building codes has been a requirement for TWIA eligibility since 1988
  • In 2005 there was a large withdraw from the coast from private market insurers
  • Homeowners did not have WPI-8 certificates because they had no need for TWIA insurance in the past
  • A waiver program was established after that and now there is a surcharge for exceptional properties; only residential structures
  • Most homes with the waivers are older homes with slightly lower value
  • Deshotel asked about the length of time it takes to process policies at TWIA
    • The business is very seasonal and even if there is a large volume of applications, coverage will never lapse because of the length of application processing time
  • Eiland noted it would be good policy and very convenient for TWIA if policies were written in a way that they did not have renewal dates around hurricane season

 
Deeia Beck, Public Insurance Counsel, Office of Public Insurance Counsel

  • Reinsurers have a tendency to price higher for areas with a high magnitude of loss
  • With premium discounts and grant programs, bolstering existing homes should be achievable to reduce damage
  • Eiland noted the reason people do not retrofit their homes is because they do not have the cash; if the state authorized TWIA to go in and retrofit people’s homes they could be paid back and have some type of revolving loan program while continuing to pay their premiums; it would reduce TWIA’s exposure
    • The retrofit discount for TWIA is 10%

 
Public Testimony
 
James Skrobarczyk, Self

  • Houses can be built to withstand hurricanes
  • Corpus Christi has had active enforcement of wind straps since the 1970s
  • It is not rich people who live on the coast who can pay for extremely high insurance rates; it is factory workers and refinery workers who cannot afford high rates

 
Corpus Christi Resident

  • TWIA is allowed to give discounts for homes built that exceed the building codes but they dont
  • Currently they do not provide the discounts and they should be required to

 
Ron Rohrbacher, Texas Association of Builders

  • Texas uses the international residential building code which is enforced
  • Building codes work
  • Texas has a system in place through TDI and TWI for WPI-8; it is voluntary in first-tier counties
    • It might be beneficial to make that a requirement
  • Builders in Texas have already covered the bases on many issues such as strengthened doors and shutters and not using vinyl sidings and soffits
  • Rep. Abel Herrero asked about cities altering the code and creating exceptions
    • Cities have the ability to make changes to code but most of those changes are in the administrative portion; cities do not like to lessen the code because they would be on the hook
  • Herrero noted that who enforces the code is equally important as the code itself; is there something in the process of building a home that is missing that could make enforcement better
    • In a first-tier county, TDI can inspect a building to get a WPI-8 or a licensed engineer can do the inspection; there have been some occasions where engineers have left the program after starting a home; when an engineer comes into a project mid-way through they may not want to approve the project because they would be liable if it wasn’t built correctly