Biennial Report to the 83rd Texas Legislature: Department of Insurance Page: 31
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Legislative Considerations
Texas Windstorm Insurance Association
Background:
When Hurricane Celia struck the Texas coast in 1970, many insurance companies ceased selling property
insurance in the Gulf Coast region. In 1971, the Texas legislature created a mandatory association of all
property and casualty insurance companies, now known as the Texas Windstorm Insurance Association
(TWIA), for the benefit of coastal consumers.
TWIA provides wind and hail insurance in the 14 coastal counties of Texas and certain parts of Harris
County to consumers unable to obtain such insurance in the voluntary (private) market. The fourteen
coastal counties eligible for TWIA coverage, along with the select portion of Harris County, are Aransas,
Brazoria, Calhoun, Cameron, Chambers, Galveston, Jefferson, Kenedy, Kleberg, Matagorda, Nueces,
Refugio, San Patricio, and Willacy Counties. Together, these 14 counties and portion of Harris County are
known as Tier 1. TWIA functions similarly to other insurers in that it issues policies, collects premiums and
pays claims.
TWIA began experiencing a significant growth spurt in 2006 as insurers again reduced their writings
following back-to-back horrific hurricane losses in 2004 and 2005, which included Katrina, Rita and Wilma.
TWIA's exposure (direct liability in force) has grown from $23.3 billion as of December 31, 2005 to $74.3
billion as of September 30, 2012.
On September 13, 2008, Hurricane Ike struck the Galveston area. As the largest insurer of wind and hail in
Tier 1, TWIA was inundated with over 92,000 claims. TWIA's losses for Ike claims exceed $2.53 billion to
date.
In 2009, the Texas legislature enacted major changes to TWIA operations with the passage of HB 4409,
including the clarification of TWIA's purpose as the insurer of last resort for windstorm and hail insurance
in the seacoast territory.
HB 4409 also revamped TWIA's funding mechanism in the event that losses exceed the total of TWIA's
cash on hand, the catastrophe reserve trust fund and any available reinsurance proceeds. Prior to HB 4409,
such excess losses were funded through assessments on member insurers in proportion to their statewide
property insurance market share. Insurers recouped any assessments over $300 million via credits against
their premium taxes owed to the state over five or more years. HB 4409 replaced the assessment/premium
tax credit method with a program of post-event bonds to be issued by TWIA. The bond program provided
for up to $2.5 billion of bonds in any one catastrophe year, in three tranches, with repayment through a
combination of TWIA premiums, surcharges on most property and casualty policies issued in Tier 1 (the 1431
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Texas. Department of Insurance. Biennial Report to the 83rd Texas Legislature: Department of Insurance, report, December 2012; Austin, Texas. (https://texashistory.unt.edu/ark:/67531/metapth575994/m1/32/: accessed July 8, 2024), University of North Texas Libraries, The Portal to Texas History, https://texashistory.unt.edu.; crediting UNT Libraries Government Documents Department.