State approves windstorm insurance rate hike

This week, the Texas Department of Insurance approved windstorm insurance rate increases for residential and commercial properties.

That the Texas Windstorm Insurance Association needs the funds isn’t in dispute. The impact to coastal homeowners and businesses is another matter entirely.

“It’s a token drop in the bucket to what really needs to be done,” said State Rep. Rene Oliveira, D-Brownsville. “In my opinion it wouldn’t be enough to cover the claims if we had a Katrina-size hurricane.”

On Thursday, the Texas Windstorm Insurance Association, the state’s insurer of last resort for windstorm coverage, was granted rate increases of 8.2 percent for residential and 5.2 percent for commercial properties, effective Feb. 1, 2008.

Texas Insurance Commissioner Mike Geeslin called the increase necessary to improving the financial health of windstorm insurance.

Tens of thousands of businesses and homeowners in the 14 Texas counties, classified as Tier 1 because they border the Gulf of Mexico, have lost their windstorm coverage.

Allstate dropped windstorm coverage for nearly 65,000 policyholders last year, and other companies, such as State Farm, stopped coverage within 2,500 feet of the coast.

In the wake of the disastrous 2005 storm season in which hurricanes Katrina and Rita battered gulf coast states, many private insurers abandoned the coast, forcing their clients to seek “insurers of last resort.”

But, while TWIA was realizing a windfall of new clients, it quickly became clear that if a major storm were to hit the Texas coast, the association would be woefully underfunded.

“The consumer, of course, doesn’t realize that rates need to be increased,” said Kevin Alford, of Alford Insurance Agency Inc. “But, it had to be done.”

Based on the average residential TWIA premium of $1,023 per year, rates will rise $84, according to the agency.

The average commercial policy of $6,842 would see a $369 increase.

Oliveira is concerned about the economic hit businesses will suffer from such a hike, but added that the situation is a burden Texans should share.

The prayer, according to Oliveira, is that marginal increases will be made over time and with any luck Texas will avoid a major storm until enough money has accumulated in the fund.

“That’s very risky,” Oliveira said. “What we need to do is dangle enough carrots and sticks to get private insurers back into the windstorm coverage.”