TWIA provides windstorm and hail coverage in 14 coastal counties and a few other areas. It was originally intended to provide windstorm insurance coverage only to those who could not purchase insurance - supposedly as the “insurer of last resort.” Unfortunately, today TWIA is the only provider and now has a massive and unsustainable risk exposure. In 2011, it was estimated that TWIA’s claims exposure was over $75 billion in insured risk, but it had less than $80 million in available funds to cover the risks. (If TWIA were a private insurer, and not a quasi-governmental agency, the amount they would be required to have in reserve is $25 billion.)
In 2009, the funding mechanism for TWIA was changed to allow for the sale of public securities, or bonds, to meet claims obligations. However, the ability to sell bonds relies upon the market’s assessment of TWIA’s ability to repay the bonds. Since TWIA is broke, due to the 92,000 claims filed after Hurricane Ike, the thousands of mishandled and overpaid claims, and the rapacious attorney’s fees tacked onto every litigated claim, there is little likelihood the market would purchase TWIA-backed bonds and would instead expect the State of Texas (ie: the taxpayers) to back the bonds. If TWIA is allowed to continue operating the way it does today, future hurricanes could potentially cost Texas taxpayers billions. That is unacceptable!
Since before I decided to run, I’ve stated that TWIA could no longer be propped up with a few tweaks to its system. It is not properly funded and is not in a financial position to meet its obligations. Continuously hiking rates is unethical, considering that TWIA could not pay its obligations anyway. Thus, I’ve advocated that total reform is necessary. Just recently (Feb 2012), the Texas insurance commissioner stated that “fundamental restructuring of TWIA is necessary.”
I do not believe that our state government should be in the business of insurance. It is not a constitutional duty and has usurped the mechanism of the free market to respond to the risks. I believe that tort reform should be applied to the TWIA process. And furthermore, free market principles should be enacted to draw private insurers back into the market, giving coastal residents the same insurance options that other Texas residents have in high-risk areas. (It’s a little known fact that areas of inland Texas have higher risk exposures due to hail damage, than most o the coastal counties, yet insurers still accept the risk while avoiding coverage on the coast.) The bottom line is that Texas taxpayers should not be at risk due to the insolvency of TWIA.
Upon my election, you can count on me to represent neither the insurance industry nor the trial lawyers – but the people of District 24 and all of the Gulf region in addressing TWIA reforms.