As a Houston insurance claim law firm, we have been reporting on the Texas Windstorm Insurance Association (TWIA) situation regarding the lack of funds for insurance claims. After 2008’s Hurricane Ike wiped out the association’s reserves, the concern has been that the TWIA does not have enough funds to cover Texas windstorm insurance claims should a storm hit the Gulf Coast. However, a new announcement was recently made about this concern.
Authorities have now indicated that there will be $800 million available for claims should a hurricane or serious tropical storm or windstorm hit the coast. Currently, TWIA has about $300 million on hand, but they negotiated a way to make $500 million become available and ready to pay claims if a storm hits the state’s coastline.
TWIA General Manager John Polak made an announcement on August 7, 2012 in Galveston and stated that the association secured the additional money through a bond anticipation note. He stated that the note would have no impact on either current or future rates.
As it is the peak time of hurricane season, it is a relief for Texas property owners to know that TWIA has $800 million available to pay property damage claims from storms; however, there are still some concerns.
Texas Insurance Commission Eleanor Kitzman explained that “TWIA then has up to $2.5 billion of maximum bonding capacity. Then there’s $850 million of reinsurance on top of that. If all of that were available to TWIA, there’s a little over $4 billion.” However, the $2.5 billion is post-event, and the $850 million in reinsurance won’t help until claims reach $2.3 billion.
Although there is funding, there are some scenarios in which TWIA may not have enough funding to pay the insurance claims in a timely manner. It may not be one big event that causes the problem. Rather, it could be lots of smaller storm damages that deplete the available money.