A few weeks ago, I wrote about State Representative John Smithee’s letter to Texas Department of Insurance (“TDI”) Commissioner Eleanor Kitzman, in which he expressed his concerns over the solvency of the Texas Windstorm Insurance Association (“TWIA”). Rep. Smithee, along with insurance professional David Crump, assessed data showing that TWIA would be unable to pay its policyholders’ claims in the event of a severe catastrophe.

To her credit, TDI Commissioner Kitzman responded to Rep. Smithee’s concerns.

As has been noted, there are circumstances under which the Texas Windstorm Insurance Association’s (TWIA) current funding options may be insufficient to pay all policyholder claims on a full and/or timely basis. This is not a new development but one that TDI has been monitoring for some time. TWIA’s rates have been inadequate for the purchase of sufficient reinsurance that could provide greater protection to policyholders. TWIA’s current structure is simply not sustainable. TDI is currently exploring options for a more viable approach and we look forward to working with the legislature on a comprehensive solution.

The Texas Legislature meets once every two years, and their next session is scheduled for 2013. TDI Commissioner Kitzman makes it clear that TWIA policyholders should expect their rates to go up, so TWIA policyholders should pay close attention to the next legislative session to learn how much more they should expect to pay. Currently, there are caps on how much TWIA can increase premiums, but the Legislature can always change that in an attempt to make TWIA “sustainable.”

According to TWIA’s brochure,

[TWIA] is the state’s insurer of last resort for windstorm and hail insurance coverage in the 14 coastal counties and parts of Harris County (east of Highway 146). Created by the Texas Legislature as a nonprofit organization, TWIA provides windstorm and hail coverages when private-market insurance companies exclude them from their residential or commercial policies sold to coastal residents. Because TWIA is the provider of last resort, we do not try to expand our customer base or actively compete against private insurance providers.

It looks as though living on the Texas coast is about to get more expensive.