Texas Windstorm Insurance Association: Group can cover losses from all but 2 percent of storms
Corpus Christi Caller Times
By Rick Spruill
CORPUS CHRISTI — The Texas Windstorm Association has enough money to pay claims for nearly any storm that hits the coast.
The association on Tuesday afternoon told state Rep. Todd Hunter in response to a Freedom of Information request that the association probably can pay all losses from all but about 2 percent of hurricanes, based on its analysis of hurricanes of all categories striking the Texas Coast.
“The probability that losses from a single hurricane will exceed TWIA’s ability to pay them is approximately 1.6 percent,” wrote David Durden of the Texas Windstorm Insurance Association.
Corpus Christi has about a 1 in 10,000 chance of being devastated by a Category 4 hurricane that was the basis of a model released last week showing more than $14 billion in potential damages.
The association currently assumes about $3.15 billion funding made up of $300 million from policy premiums combined with the association’s Catastrophe Reserve Trust Fund, $2 billion from issuing bonds and $850 million coming from reinsurance.
Hunter’s request follows a week of conjecture concerning the validity of information exchanged in letters between Texas House Committee on Insurance Chairman John Smithee, R-Amarillo, and Texas Insurance Commissioner Eleanor Kitzman.
Smithee’s letter, sent June 19, said models provided by the association estimate that a Category 4 hurricane could cause damages in excess of $14.3 billion in Corpus Christi, $14.2 billion in Galveston and $3.3 billion in Brownsville.
The letter asked Kitzman to confirm that the association would come up about $10.7 billion short if a storm of that magnitude should strike and what the commission is planning to do about it.
Kitzman confirmed the cash shortfall, based on the damage estimate.
Coastal Bend lawmakers responded with letters of their own to Kitzman, complaining that the information was misleading and that Kitzman had overstepped her boundary by speculating that Texas is not required to back the association should it become insolvent.
Smithee on Tuesday said his letter to Kitzman was intended to clarify numbers he received as part of a response from the windstorm association to a resident’s request.
The projected damages alarmed him and prompted him to seek clarification from Kitzman, who has ultimate oversight of the association as part of state-mandated rules concerning the embattled agency.
“My point is that if consumers are buying these policies … they need to know such information,” Smithee said.
Hunter on Tuesday said he respected Smithee’s wish to clarify data with the commissioner but questioned why the clarification was not more forthcoming.
“I think it is extremely improper to cry wolf and raise panic when the possibility of a hurricane catastrophe is 1 in 10,000 years,” he said. “Severe tornadoes and hailstorms seem to be more likely in other parts of the state, but you don’t see them being panicked by those scenarios.”
Hunter said that the association has enough money to pay claims in 98.4 percent of all scenarios also is an important point Kitzman failed to make while questioning the state’s obligation to extend full faith and credit to the association should it become insolvent.
“Such statements cause backlash in financial and real estate markets,” he said.
He said the letters, while part of the normal exchange of information between lawmakers and agency heads, may reveal a lack of empathy from other parts of the state for the coastal counties.
“It’s time our agencies stopped treating our coastal communities as they are unwanted,” he said. “We need agencies to be helpful and constructive, not destructive.”
State Rep. J.M. Lozano, whose district includes San Patricio County, joined the chorus.
“The entire Coastal Bend delegation is united in fighting this attack on people who live and work along the coast of Texas,” he said in a statement Tuesday.
Meanwhile, business leaders now are standing on uncertain ground, said Foster Edwards, president and CEO of the Corpus Christi Chamber of Commerce.
“The consumer needs a fair shake, clearly, but the consumer also needs the truth,” he said.
State Sen. Juan “Chuy” Hinojosa, whose district includes Nueces County, said the new information amplifies lawmakers’ notion that the entire windstorm discussion has taken a regressive turn.
“As I noted in my letter to Commissioner Kitzman last week, conjecture is not the best foundation for good public policy,” he said in a statement issued Tuesday afternoon.
Corpus Christi Caller Times
