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The Texas Department of Insurance (TDI) held a hearing March 3 in Austin to receive comments on proposed changes to Texas Windstorm Insurance Association (TWIA) rules and policies policies – the report below covers those proceedings.  A hearing was also held in Beaumont and a future hearing will be held March 5 in Corpus Christi. Use the following links to see the proposed rules:

 
Brian Ryder, Actuary, TDI

  • TDI is proposing rules to implement HB 3, 82-1 which:
    • Concern procedures for making and assessing premium surcharges; premium surcharges are required to repay class 2 public securities that are issued in the event of a catastrophe that results in losses that exceed the TWIA's premium, revenue, available reserves, and amounts available in the catastrophe reserve trust fund
    • Concern funding losses and operating expenses in excess of the TWIA's premium and other revenue; matters addressed in the proposed plan of operation amendments include:
      • the catastrophe reserve trust fund
      • financing arrangements
      • issuance of public securities
      • use of public securities proceeds
      • payment of public security obligations.
  • TDI published rule changes on 10-14-13 and received comments which have been incorporated into this rule proposal

 
Todd Hunter, State Representative, Corpus Christi

  • Strongly opposes the rules that are being proposed
  • Passing out an opposition letter signed by ten legislators in opposition
  • Does not see in the law where TDI is mandated to pass these rules this year
  • The rules are blatant discrimination and are unfair; they single out 14 coastal counties only
  • Setting a precedent that TDI can pick on certain areas of the state
  • Wants TDI to look at the makeup of the minority groups that will be taxed by the surcharge; this has not been looked at and an analysis needs to be done
  • The rules are not clear on cases such as second home owners, out of state home owners, rental car companies, etc. regarding the surcharges
  • The rules basically suggest that insurance companies should not do business in the 14 coastal counties
  • TDI literature states that rules will allow insurers to collect premiums in installments or all at once; places a burden on carriers that have to collect
  • There is no answer to the question of how much a premium surcharge will be; it does say 70% of the cost of class 2 public security but that is all it says
  • When TDI was required to set incentives for insurers along the coast they did nothing; now that they have been allowed to set a surcharge they are acting as if it is a requirement
  • There have not been helpful meetings in any 14 coastal counties recently
  • TDI website states that discrimination may not be placed on anyone due to a number of reasons including geographical location; that is happening to coastal communities with no actuarial reasoning

 
Derrick McGill, Nederland Resident

  • Struggles to afford windstorm insurance because it continues to increase
  • Would be forced to sell his house and rent a home if surcharges go into effect
  • The legislature should go back to work to find a solution that does not affect coastal residents so greatly

 
Jay Thompson, Association of Fire and Casualty Companies of Texas

  • Because of potential for losses, the legislature moved to a system where bonds would be used in order to fund claims when TWIA did not have enough money
  • Surcharges were considered with the intention to pay back bonds
  • The new rules use the surcharge system first and will give refunds if necessary which seems to be in conflict with the statute which suggests that assessments, TWIA and then surcharges should be used to pay back bonds
  • There is the potential for paying refunds to become an issue for insurers since it must be done in 90 days after TWIA pays insurers when in many cases the insured may have moved out of the county or out of the state and may not be easily located
  • Rules give the ability to charge surcharges in installments but it seems that if surcharges are paid in installments all policies surcharges must be paid in installments; this needs to be more consumer friendly and offer the consumer the option

 
Albert Betts, Insurance Council of Texas

  • The rules seem to reverse statutory language
  • The repayment structure, administrative issues and accounting problems brought on by the refund of surcharge needs to be reworked
  • Reiterated Thompson’s concerns about the one size fits all format of surcharge collection

 
Jenny Cross, Corpus Christi Chamber of Commerce

  • Opposed to the rules
  • Rules will discriminate against those living on the coast and make it hard to attract new residents and businesses

 
Fred Bosse, American Insurance Association

  • Opposed to the rules in their current form
  • The issue needs to be taken back to the legislature
  • Commissioner Eleanor Kitzman made it clear that insurance incentives were not put into place because the funding was not appropriated to the department to do so