In today’s post, I bring you news about the Texas Windstorm Insurance Association’s (TWIA) financial troubles as well as an updated figure of the damage caused by the hail storms in the Dallas-Fort Worth area.
Recently, State Representative John Smithee, chairman of the House Insurance Committee, wrote a letter to Texas Insurance Commissioner Eleanor Kitzman about TWIA’s shaky position. Representative Smittee advised Commissioner Kitzman that TWIA’s current financial condition is much worse than anyone anticipated. Smithee noted that TWIA’s own records indicate it would be unable to pay billions in potential losses if a Category 4 hurricane struck the Texas coast. Smithee found that if a Category 4 storm hit Galveston, Texas, it would cause approximately $14.2 billion in damage. A similar-sized storm in Corpus Christi would cost $14.3 billion.
Even under the best scenario, Smithee found that TWIA will have only a little more than $3.6 billion in resources.
David Crump, an insurance professional who has studied TWIA and collected data with Smithee, said it is “remote possibility” that a Category 4 storm could hit the Texas coast this season, and TWIA could realistically be short about $3 billion if a storm of that magnitude hit Galveston. However, Crump’s analysis does little to comfort the typical TWIA policyholder.
In his letter, Smithee asked Kitzman if TWIA policyholders have been informed that the insurer may not have sufficient resources to pay claims and wondered whether TWIA policyholders have been made aware that the State of Texas has no obligation to help pay claims that TWIA cannot pay.
“It would seem only fair that policyholders should be made aware of the precise risk they are taking in purchasing insurance from TWIA,” Smithee wrote.
In other news, revised figures have come in for the hail storm that hit north Texas a few weeks back. Last week, I wrote that an insurance-industry group estimated the hail damage to reach approximately $2 billion. That number has now been cut in half by another group.
The Insurance Council of Texas – a trade group for Texas insurers – came out with its own numbers estimating damage from the violent, Dallas-area hailstorm at just under $1 billion. Previously, the Southwestern Insurance Information Service, which speaks for insurers in Texas and Oklahoma, estimated losses at $1.5 -$2 billion. Even with the lowered estimate, the hailstorm will still rank as one of the largest hail losses ever. The Insurance Information Institute noted that hail storms typically cause $1 billion in damage annually.