Lawmakers explore ways to lower home insurance after rate hike

AUSTIN – The Houston Chronicle reports that House lawmakers on Friday called for a legislative response after the state’s insurer of last resort voted this month to raise rates for homeowners along the Gulf Coast, signaling they may be open to broader reforms in the state’s insurance market. The Texas Windstorm and Insurance Association’s nine-member board voted for a 10% rate increase after a staff analysis found that the insurer has for years been unable to cover expected costs, which include paying claims on damage from storms such as Hurricane Beryl. Lawmakers largely agreed that TWIA’s current funding structure was unsustainable. “There’s no business that I know out there that wants to keep going if they got to pay to keep the business open,” said Rep. Richard Raymond, a Laredo Democrat.

TWIA was created decades ago to insure homeowners who couldn’t afford wind and hail coverage on the private market. It insures Texas’ 14 coastal counties and a corner of Harris County. David Durden, TWIA’s general manager, said the cost of providing wind and hail coverage along the coast has increased, largely with the rising cost of reinsurance, a form of insurance for insurance companies that distributes risk over geography and sectors. As the number of TWIA policies has spiked — 38% since 2020 — it must hold more reinsurance to cover its liability, Durden said. Roughly half of premiums go to cover TWIA’s reinsurance costs, he said, a “dramatic increase” from 2021. Reducing TWIA’s reliance on reinsurance, either by using state reserves to fund the nonprofit’s catastrophic reserve fund or otherwise propping up a state-sponsored reinsurance fund, would help lower rates. TWIA is funded through premiums paid by policyholders as well as assessments paid by private insurers operating in other parts of the state. That means that ratepayers throughout the state help subsidize TWIA. Rep. John Smithee, an Amarillo Republican, said the problems with TWIA were indicative of larger challenges in the insurance industry in Texas and that he was open to more fundamental changes to how insurance is regulated in the state.