Two state representatives, both attorneys, who have voiced opposition to any rate increases at public meetings of the Texas Windstorm Insurance Association have taken to filing bills affecting the association’s ability to raise rates, despite the board’s statutory obligation for rate adequacy. Two other lawmakers have also filed bills affecting TWIA.
In December, the Texas Department of Insurance denied five percent rate increases for both residential and commercial policyholders even though an independent actuary pegged TWIA’s rate need at 26 percent for residential policies and 44 percent for commercial policies. TDI’s reason for the denial was procedural.
Representatives Abel Herraro, D-Robstown, and Mayes Middleton, R-Galveston, approach what they perceive as TWIA’s funding problems differently.
Herraro’s bills, House Bill 1450 and House Bill 1451, may suppress TWIA rate increases for policyholders in the future. HB 1450 would require policyholder approval before the TWIA board of directors can charge a rate more than five percent higher than the current one. Under this bill, the commissioner would set up the procedure for the notice and balloting of policyholders.
HB 1451 proposes changes to the TWIA board. The bill would replace the commissioner with the governor as the appointing authority to the board, then add two members to the nine-member board, both of whom would come from coastal counties, bringing coastal representation to a total of five on the 11-member board. Further, four of the five coastal county members must be TWIA policyholders and would come from nominations made by the Office of Public Insurance Counsel. None of these four coastal representatives could work in the insurance industry or be closely related to someone who does.
Only the fifth coastal member would bear the existing requirement to be a property and casualty insurance agent.
HB 1451 would reduce the term of board members from three years to two years and cap their service on the board to six years. Under existing law, a board member may serve three consecutive three-year terms, or a total of nine years, on the board. If passed, both of Herraro’s bills would become effective on Sept. 1.
When Middleton appeared at TWIA board meetings, he argued that TWIA spends too much on reinsurance. He brings TWIA’s reinsurance spending to zero in House Bill 769. His bill would repeal the provision for insurers to pay the premium for any reinsurance purchased on TWIA’s behalf that exceeds the one-in-100 year PML. Instead, Middleton proposes to require the private market insurers to share 100 percent of the premium for reinsurance that TWIA must buy. Further, the bill prohibits the private market insurers from recouping their share of the reinsurance premium by imposing a premium surcharge on their policyholders.
Middleton’s proposal would also restrict where each insurer could purchase its portion of TWIA’s reinsurance by prohibiting insurers from buying the coverage from a reinsurer involved in preparing the risk model the association relies on to determine the probable maximum loss.
HB 769 would make two other significant changes to TWIA as well. It would prevent the board from voting on any rate filing if there is a vacancy on the board, and it would move the headquarters of the association from Austin to a first or second tier coastal county.
Legislation proposed by Rep. Joseph Deshotel, D-Port Arthur, House Joint Resolution 26, would expand TWIA’s coverage offerings and find a funding source for losses when premiums are insufficient. Deshotel has introduced a constitutional amendment to authorize casino gaming, with revenues dedicated to TWIA as it takes on also insuring the coastal counties for catastrophic flooding. Casino licenses would be limited to nine, with all casino locations no more than 200 miles from the Gulf of Mexico. Additionally, the constitutional provision would authorize the Kickapoo Traditional Tribe of Texas to enter a compact agreement with the state to operate casino gaming within 200 miles of the tribe’s reservation near Eagle Pass. If approved by the legislature, the proposal would go to the voters of Texas to amend the state’s constitution.
Not leaving public policy concerning TWIA to coastal lawmakers, Rep. Ken King, R-Canadian, filed House Bill 429 to expand TWIA’s coverage to include tornadoes and wildfires throughout the state. King’s district is bordered by the Oklahoma state line to the north and east. King offered similar legislation in 2019; the last recorded action on the 2019 bill was referral to the Insurance Committee. King is not an attorney.
As of Feb. 18, none of the legislation recommended by TWIA has been filed. Bill filing deadline is March 12.