Recently there has been a furor of letters and articles about the  Texas Windstorm Insurance Association [TWIA].  Many stated concerns are well based.  But sadly our famous “Lone Star Unity” is under attack by those who want to pit Texans against Texans.  The time is now to redirect our efforts to fix what all agree is a broken system.

The  same problem that faced us in 1971 exists today – namely the cumulative withdrawal of market from parts of Texas by many or all Texas licensed property insurers. In 1971, the solution was the drafting and passage of the Texas Catastrophe Property Insurance Act. The Act originally created the Pool of all Texas property insurers as a market in which participation by each insurer was based on its market share in the state. This “shared market” replaced the individual markets withdrawn by individual insurers. But over time legislative “tweaks” transmuted the “shared market” of the Pool into what we have now, TWIA – an insurer of last resort. This transformation has created an under-funded insurer of last resort.

A far better solution than seeking post incident funding for claims is to restore the original “shared market” whereby an insurer members’ financial responsibility is offset by credit for writing policies voluntarily.  Furthermore, insurers should be provided with a Texas Reinsurance Facility, not an unregulated out of state reinsurance market.

This writer believes that Texas has become a victim of a seeming universal decision by voluntary for-profit insurers withdrawing from most hurricane exposure because of mercurial changes in the cost and availability of unregulated reinsurance.  Sadly, insurers, with reserves inadequate for these types of risk, have become dependent on ‘rented capital,’ or what is called reinsurance.

This over dependence on reinsurance is a systemic problem which will likely creep, if unchecked, into risk assessments for non-coastal regions of Texas. In short, what the coastal counties of Texas have experienced over the years with hurricanes claims, a dwindling voluntary insurance market, and higher premiums may very well occur when windstorm events sweep across the inland counties of Texas. Clearly rate increases alone will not solve the shortfall of capital to pay valid windstorm claims – whether you are on coast of Texas or not.

When rates increases and affordable insurance is not available to coastal Texas, the whole Texas economy suffers. This is not a battle of inland vs coastal counties or coastal counties against other coastal counties or even Texans against insurance companies. It is not a battle – it’s a challenge – a challenge that we as Texans should overcome together.

Lee Otis ‘Otie’ Zapp, Jr.
Chair, Coastal Windstorm Insurance Coalition
4800 Seawall Boulevard
Galveston, TX 77551