Texas Senate Watch — Day 3

We’ll see if S.B. 1700 can make it a vote in the Texas Senate today.  The past two days of failure in that regard suggest its sponsors do not yet have the votes.  Perhaps with some substantial floor amendments, it might make it today.  I’ll be watching as best I can but, since I suspect most of the action will take place behind closed doors and the Senate proceedings will be but a quick ratification of what has been worked out in private, no guarantees I will be watching at exactly the right moment.  Corpus Christi Caller report Rick Spruill @Caller_Rick is also watching today, so that’s an alternative source of news.

Or, of course, you can just watch the proceedings yourself here.

Note: Timestamps on the post are off by one hour either due to a bug in WordPress or a lack of understanding on my part about how to set  some option.  Sorry.

15.00

So, nothing happened on windstorm insurance on the floor of the Texas Senate today.  The one thing perhaps everyone could agree on is that time is running out to change anything in this regular session of the 83rd Legislature.

12.40

They are recessing until 2:15.  The Senate Business and Commerce meeting will have a meeting at Chairman Carona’s desk during the recess.  I have no idea what they will discuss.

Unfortunately, my day job is likely to prevent me from keeping even half an eye on the Senate for the next several hours, so you are all on your own for a bit.

12.20

Might be oyster and shrimp lunch time because nothing has happened on the Senate floor for quite some time.  Oh, wait. They just started up again.  But they are just reading and referring House bills to Senate committees.

11.58

Senate back considering bills, but not (yet) S.B. 1700.  The current one, on toll road conversion, is generating some actual comment.

11.31

They are into announcements rather than bill consideration.  But the chair indicates there may be additional bills to be heard today.

11.20

Senator Royce West certainly gets his colleagues’ attention by saying he was adding billion to the cost of a bill on digitizing filings in civil lawsuits.  Just kidding.

10.51

Senator Larry Taylor, sponsor of SB 1700, is now speaking, but not on Windstorm Insurance. Instead, he is talking about CSSB 1560 involving easements.

10.49

Chair says, “Members, that concludes the morning call.” Looks as if they are now taking up substantive bills.

Screenshot_5_15_13_11_46_AM

10.40

Oyster and shrimp lunch for legislators being discussed.  No Windstorm bill yet.

11.42

Senate recesses until 11 a.m. Wednesday, May 15, 2013.  Still no S.B. 1700.

11.22

Reading and referring various bills to committees.  Does this mean voting on bills out of committee is over for today?

11.03

Actual debate on the floor. Not about windstorm insurance but about the right to marry.  And not about gay marriage but about photo identification. Should one need photo identification as a prerequisite to marriage?

10.44

Not that it has anything to do with windstorm insurance, but an interesting bill for insurance junkies on subrogation rights and the “make whole doctrine”.  H.B. 1869.  I’ll have to read it.

10.35

Now calling bills for review.  So the procedure seems to be

1) Suspend regular order of business so that the bill can be considered “out of order”; Vote on this.

2) Floor amendments offered and voted on.

3) Move passage to third reading.

4) Motion to suspend the 3 day delay between second and third reading

5) Third reading of bill (just caption)

6) Motion for final passage.  Roll call vote.

10.09

Session begins.

10.01

Upbeat music now playing heralding the possible start of session.  Also, please note that due to some issue with my liveblogging software, the time stamps are an hour off.  So, if this says 10:02 I believe it means 11:02.

09.58

Nothing happening.  Various people milling around.  No sound, but I am hoping that is because the microphones are off rather than any issues with my Internet feed.

13.35

Motion to adjourn until tomorrow. Passes.  So no S.B. 1700 today. #SB1700 #TWIA

13.34

Motions being heard to suspend Senate rules to permit announcements of urgent committee meetings.  No sign of S.B. 1700.

13.31

I get the sense that if you watched this Internet broadcast for a few days you might actually understand Senate procedure pretty well.

13.26

Wow, things move fast once they get to the Senate floor.  My sense is that everything is negotiated out ahead of time off the floor.  Still no sign of S.B. 1700.  We are hearing reading and referral of various bills.

16.09

The TWIA board today decided not to decide whether to consent to a receivership, tabling the idea until its May meeting.  That leaves the ball back in the court of Texas Insurance Commissioner Eleanor Kitzman, who can try to throw TWIA into receivership without TWIA’s consent.

A symbolic representation of the actions of TWIA's board today

A pictographic representation of the actions of TWIA’s board today

This is also the end of the live blog experiment.  It went well until my feed went out.  Next on the agenda, hearings in Austin on SB 1089 that would “fix” TWIA by placing more of the burden on people who don’t have real estate on the coast.

14.50

Alas, I must deal with reality and stop watching the blank screen.  If they’re still on when I return, I’ll live blog some more.  Otherwise, we’ll skip the play by play and go to some analysis at the end of the day.  Thanks for viewing.

14.24

While we’ve been waiting, I got a phone call from another attorney who had evidently been retained to examine the possibility of TWIA making an assessment under the old law.  Looks like that attorney, examining the issue independently, was likewise extremely dubious about making an assessment under 2210.058. #twia. Lots of hurt, but I still don’t see any cavalry coming over the hill.

14.21

No longer getting the error message and the little timer at the bottom says 2:25, so maybe my feed is back but they are still speaking to their attorneys.  Would not be surprised if this took a lot of discussion since they will basically be consenting to putting themselves out of business. #twia

14.07

Just got a tweet saying they are still in closed session.  So there is some hope that the video feed will emerge from what may be mere hibernation.  I am also advised that the audience has, quite literally, been left in the cold. #overairconditioning #twia

14.00

Still no connection to the TWIA video server.

13.45

I fear I have lost my feed of the meeting. Getting the mysterious Error 0-3222 message.

13.39

One of the matters brought up by Greg Smith of the Coastal Task Force was whether TWIA was being treated equivalently to the Texas FAIR plan, a sister government-sponsored insurance company. He contended, I believe, that the FAIR plan was likewise insolvent but was not being put into receivership.  This issue was also brought up by TWIA with TDI, but the TDI representative said she did not know if the FAIR plan was insolvent.

So, although I can’t find a 2012 financial statement on the Web for the FAIR plan (hmm?), I can find a 2011 financial. It apparently shows that the FAIR plan was million in the red. It may be, however, that TDI thought that the FAIR plan could work its way out of this negative position.  Whether that occurred, I don’t know either.

Oh. Seeing some action on the video screen for the meeting.

13.29

I just posted an excerpt of the letter from Rep. Deshotel. I now see, by the way, that the letter was signed by State Representatives Joe Deshotel (District 22), Craig Eiland (District 23), Abel Herrero (District 34), Todd Hunter (District 32), Eddie Lucio III (District 38) and Allan Ritter (District 21). This is the only thing even close to a legal argument I have found explaining how TWIA could recapitalize and avoid receivership by assessing insurers under the old statute. But, as the letter concedes, former Commissioner Geeslin did not actually say that TWIA could assess the insurance industry under the old law (although he does, I agree, come close to doing so).  But this is what good old Latin-liking lawyers call an “ipse dixit.”  That’s the fancy term for, “because I said so.”  It’s not a legal argument.  There is no evidence that former Commissioner Geeslin confronted section 44(2) of HB 4409 and had a theory for how the word “repeal” does not mean exactly what it says.  Section 2210.058 of the old law was the provision that permitted insurer assessments — and that statute was repealed four years ago in HB 4409.

Now, the more interesting question — one also raised by some of the public comment —  is whether the State Representatives are trying to set up some kind of lawsuit against someone for failure to assess adequately while the old law was in effect.  Such a lawsuit, however, is problematic in that, even if it prevails, which would likely be an uphill struggle, how is anyone going to pay a judgment?  Moreover, I suspect TWIA board members will find at least qualified immunity from suit, will be able to argue that they thought the assessment was adequate, and will question standing and duties.  Don’t count on such a lawsuit fixing TWIA ever — and certainly not in the short run. And short, in this context, means at least three hurricane seasons’ worth.

13.18

The Deshotel letter key paragraph

The Deshotel letter key paragraph

13.15

So, let’s go to the halftime report.

We need to separate out the harm caused by TWIA being insolvent from TWIA being put into receivership.  TWIA’s insolvency is a real problem in that it means, if the accountants are correct, that TWIA does not have enough money to pay claims and that it does not anticipate enough money to do so through the end of this year even if there is no significant storm. It is just fascinating that this singular fact does not appear to bother any of the speakers from the coast who came to the hearing today. Instead, the focus is on receivership.  Why? Do they think that grab law, which is the alternative to receivership, is an improvement?

The best arguments against receivership were that it might hurt the ability to obtain a Bond Anticipation Note secured by the potential for Class 1 securities being issued and that it might possibly hurt issuance of Class 2 and 3 securities. But the empirical evidence on this point is awfully thin.  It is not clear that a BAN could be issued anyway or that a post-petition receivership would hurt rather than help short term bond creditors.

The other thing that I think is clear is that the TDI Commissioner is going to act swiftly here.  She has a first mover advantage and does not need the TWIA board’s cooperation. TWIA’s board can cooperate, which might matters go more swiftly and less expensively, or it can make some short term political hay by opposition.  But what would it really accomplish except make some people who have demonized the incumbent insurance commissioner feel better in the short run?

The other matter I wonder about is seeing this as just one move in the Austin chess game about how TWIA is going to be restructured or depopulated.  Does the fact that it is in receivership help the argument to move towards an assigned risk plan as in HB 18? And maybe that is what this is all about.  If TWIA has “failed,” then the case for propping it up may look weaker and the case for going to something significantly different, a market oriented assigned risk plan may look stronger.

And, by the way, we are now on minute 10 of the 5 minute break.

13.04

TWIA goes into a closed session at 2:05. Apparently just a 5 minute break.  Except that in my experience one should add a zero to declared break times.   Anyway, we are done with Round 1.

13.03

TDI: Why is receivership in best interests in policyholders. TWIA does not have enough assets to pay its liabilities. Current claimants may not get claims paid fully. Make sure that actual damages being sustained are given priority. [Over what? Extra-contractuals?]

TDI: We are ready to move quickly in court. But stakeholders can have input through court process. File your plan and set a hearing.  At TDI, we try to be ready for all scenarios. [i.e. they are writing a plan]/

 

13.00

TWIA: Who is this rehabilitator? Why does TDI think that the rehabilitator can do a better job than this board.

TDI: Insurance Commissioner appointed as receiver but a competitive bid to find a manager. We can get someone on an interim emergency basis.  There are better statutory remedies in receivership. [Like not pay claims in full!]

12.58

TDI: Rehabilitation stays and centralizes lawsuits [just like federal bankruptcy].

TWIA: What can we assume with Class 1 bonds in designing reinsurance program. Looks encouraging that we can get a 0 million BAN to help reinsurance. But receivership would make that harder said the TPFA folks [I think I have this comment correctly] TPFA said it had offer from Bank of America, though at a higher price tag. [This is an important issue]

TDI: We would be moving in and out quickly. TDI  has concerns about ability to issue BAN anyway given negative surplus. [Darned straight].

12.55

TWIA: Effect on mortgages and covenants

TDI: Freddie and Fannie accept residual market insurance.  Ratings relate to private insurers.  [So is she saying all is well with mortgagees].

TWIA: What about residual markets in rehab.

TDI: Can’t predict what they would do. They have had conversations.

12.53

TWIA: Why now?

TDI: 4th quarter statement. Additional litigation that created a negative surplus. And no realistic opportunity to earn its way out. Rehabilitation would not inhibit vital reform measures on the table.

TWIA: Impact on reinsurance purchase? And post-event bonds?

TDI: Receivership can definitely create challenges. We will get a plan on file very quickly. Receivers can purchase reinsurance. The goal would be to get out of rehabilitation quickly. [Don’t bet on this occurring]. Work with bond market and see what we could do. [Vague]

 

12.51

TWIA: What happens to this board if TDI puts TWIA in receivership?

TDI: Board would be suspended and the rehabilitator would operate with the power of the Board. Board could be reconstituted after emergence.

TWIA: We’ve been in administrative oversight.  We have limited authority. Why the need for this board to consent?

TDI: Things move quicker when there is consent. If rehabilitation were consented to, there would be less disruption. On the same day, the AG can go to court, enter a rehabilitation application and enter a rehabilitation order almost simultaneously. We would soon have a rehabilitation plan. Fears would be quelled. If we have a contest, there will be more uncertainty and delay. At TDI, lack of disruption is important.

TWIA: A lot of the testimony we have heard today about nervousness of bankers etc. — at least there would be a plan to take care of it.

TDI: Yes.

12.48

TDI: Being back to zero balance would be enough to get it out of receivership.

TDI (Jamie Walker). Based on projections for TWIA income there will still be negative surplus at the end of this year.  And this is in case there are no “hiccups” [like a hailstorm?].

TWIA: Is the FAIR plan insolvent? It too has a negative surplus.

TDI: I don’t know.

12.46

TDI: Rates would be continued under the current statute, unless laws are specifically changed.  [TDI being very careful and lawyerly in its answers.  Lawyerly used as a positive adjective here].

TWIA: What would be the standard to get TWIA out of rehabilitation given that TWIA is not generally supposed to have surplus.

TDI: TWIA is not required to have an excess of surplus. TDI lawyer specifying basis for receivership. Insufficient assets, not an inability to pay bills.

12.43

TWIA: that paints a pretty rosy picture.  What other states did you look at?

TDI: More than 25 states have this law.  Modeled it after NAIC act.

TDI: Rehab has not been used in the residual market before.

TDI: Process depends on specific case. If something were to happen, we would move very expeditiously. Move to rehabilitation. Rehab order by the court. Rehabilitator would file a rehab plan within one year, but it could be done in a matter of days. How were claims going to be paid and what the process would be.

12.41

TDI has no specific comment, but available to answer questions.

TWIA Board now asking questions. Receivership has a stigma. Could TDI  talk through pros and cons of receivership?

TDI: Two types of receivership. Rehabilitation and liquidation. Rehab akin to a Chapter 11 in bankruptcy. Purpose is to revitalize an insurer so it can go into the marketplace. Company can pay claims, issue policies, without market disruption.

12.38

Public comment over. Moving on. Consideration of following topics: Review options for addressing financial condition of Association.  Including receivership. Notes representation from TDI.

12.37

Eddie Cabazos — Item on agenda to go into closed session. Is that not a violation of the open meeting act? [No.]

Answer — The Open Meetings law requires final action to be taken in open session. but advice of counsel can cause a closed session.

12.35

Tom Tagliabue, Government relations person for the City of Corpus Christi. Also opposed to receivership.

12.35

Joe Vega, Mayor of City of Port Isabel [again apologies for misspelling of names].  Will hurt small businesses.

Mr. William Goldsten, Corpus Christi — Negative economic impacts to engineering and construction profession along the Gulf Coast. [You know, these are probably all fine people, but that is not the issue.  The issue is whether receivership is the best way to address TWIA insolvency.  The fact that the legislature is in session is relevant, but not dispositive.  Grab law is the alternative to receivership.  Receivership is really a code word for insolvency.  In law school, we call this argumentative technique, “fighting the hypothetical] It will create chaos along the coast. #twia. Reduce the discrimination against the coast.

12.31

Eric Sandberg, Texas Banker’s Association — We need to have viable insurance in place, particularly from a regulatory standpoint.

12.30

Eric Sanburg, Texas Banker’s Association — skipped

David Garza, Cameron County.  [Ever get the sense this might be a bit one-sided presentation of commentary?  Looks like the coast, whose ox appears gored, has gotten its political act together whereas diffuse other constituencies have not]. Receivership is not the answer.  Let the legislature do its job. If we don’t get adequate results from this legislative session, do what it takes to make us solvent.  Our bankers and mortgage holders are nervous. [Let alone homeowners and businesses!]

12.27

Foster Edwards, the Corpus Christi Chamber of Commerce. CCCofC has been working with TWIA staff for years. A “bonehead idea, frankly.” Expressed well in letter on page E4 of packet, signed by four state representatives. [Is this the Deshotel letter that I just posted to this blog.]

12.24

Mr. Perkins with the Coastal Windstorm Taskforce: Mayor of Ingleside. We speak with one voice in opposition to go into receivership.  Again the argument that assessments are available.  [Has it occurred to anyone to actually read the statute?]  Development will be hurt. [Maybe industry could pay people extra to help purchase insurance?] Let the legislature do its job. Create a transition from TWIA to some other entity but not an instant effect on the market.

12.22

Charlie Zahn, Coastal Windstorm Taskforce: Close to matching up bills for final consideration by Senate. [Really?]  Legislative process needs to take care of this issue. Receivership implies TWIA does not have the ability to pay its bills in the future. You don’t have the basis for receivership. Trust fund in place.  You have the ability to assess. [HOW??] We are a viable entity. #twia. Already had a negative impact on Texas coast, including banks. [Probably true] Can they continue to provide mortgage loans. [Yes, a legitimate concern.  But is it receivership that is causing the problem or the insolvency.]

12.18

Greg Smith, Coastal Taskforce: Question of solvency should be judged as a residual carrier, not as a private insurer.  There are other residual carriers that are much worse off than TWIA.  National Flood, New Jersey FAIR Plan and Louisiana FAIR plan are worse off. Yet no question about their solvency. Will send messages to other carriers across the nation.  Rating agencies say you don’t have to have positive surplus.  [The everyone is doing it defense?]

12.16

Anne Vaughan, Port Aransas Chamber of Commerce [my apologies for any misspelled names]. Oppose what is “nothing more than an insane idea.” [Why is it insane to put an insolvent entity into receivership? Kubler-Ross stages of grief comes to mind. Denial. Anger] Has unconfirmed Commissioner of Insurance thought this through? TWIA is our only source of insurance. [But if it were not, one would never know if TWIA premiums were too low]

12.13

TWIA board member distinguishing between comments of TWIA and comments of TDI.

12.12

Joe McComb of Nueces County: Precinct 4.  The fun part of Nueces County. I do know people are concerned about coverage.  If they’ve got TWIA, they’ve shopped coverage and they have no alternative.  Worried that the decision has been made. [Yup]  Give legislature 60 days to solve this problem.  Good part of having a crisis is that the legislature is in session.  Place faith in elected officials. It will take 60-120 days to implement receivership anyway.  [Most persuasive speaker so far].

12.09

Keith McMullen with Port Aransas: Mayor of Port Aransas. Please don’t pursue receivership. Don’t case doubt on insurance market on the coast. Already created nervousness.

12.08

Schlitterbahn Waterpark representative speaks:  How will receivership impact existing contracts with lenders and vendors? TWIA receivership creates uncertainty that will chill business. [True, but what is the alternative if TWIA is insolvent? — SJC]. Before TWIA placed in receivership, other funding alternatives should be explored. [Like what? Assessments?]  My editorial comments are in brackets.

12.06

Jim Rich of Beaumont Chamber of Commerce: Very concerned about receivership. Notes importance of coast to economy. Wants a legislative solution. Let the legislative process work.  [But what if nothing happens? — SJC]

12.03

Public comment limited to 3 minutes with a timer. No more than 30 minutes to public comment period before moving to the rest of the agenda.

12.01

Calling roll

11.59

If you can see this it is a part of Rep. Deshotel’s letter.   It’s the first inkling of any legal theory behind the idea that TWIA can still asess for Ike.  Don’t expect insurers to buy it.geeslin assessment theory

11.55

Meeting is beginning.  One can see people milling on the video.

11.53

Channel 12 News (Beaumont) reports that State Representative Joe Deshotel has issued a press release opposing placement into receivership. Add him to the list of people whom I believe are mistaken on the law.  Here’s what he says in his letter:

If the Board would simply follow the law in place for these 2008 policies by assessing the insurance companies and moving the premium money to the Trust Fund, which currently has 8 million, TWIA would have over 5 million, which is hundreds of millions more (50%) than the Trust Fund has ever had!

11.50

Rick Spruill of the Corpus Christi Caller posted a preview of today’s meeting about 20 minutes ago.

11.46

In theory, you should also be able to follow this blog on Twitter using the hashtag #twia

11.40

Here some issues I expect to hear discussed at the meeting:

1) Is TWIA really as insolvent as its annual statement asserts (i.e. 3 million in the hole).  There are occasionally discretionary choices that get made in insurance accounting.  And there are occasionally mistakes.  Does anyone have a credible argument that TWIA is not seriously insolvent?

2) Assuming TWIA is insolvent, what, if anything, is the real alternative to a receivership?  When an entity is insolvent, as TWIA apparently is, that means some creditors can not be paid in full. If you fail to create an orderly process to pay claims, it means that the entity gets taken apart piecemeal and that different creditors are randomly (or systematically) treated worse than they should be. This is why we have insolvency law and (in most instances) bankruptcy law. Why should TWIA be treated differently?

3) Is there any authority as several coastal politicians have maintained to help TWIA out by assessing insurers for losses attributable to Hurricane Ike?  This blog has repeatedly maintained here, here and here that there is no such legal authority and that the old legal authority, section 2210.058 of the Insurance Code, was repealed in 2009.  Let’s see if there is anything more than denial or bluster behind the claim that TWIA can assess insurers without there being a new storm that would justify the issuance of public securities?

Fixing TWIA for this hurricane season will require a two-thirds vote

Section 39 of Article III of the Texas Constitution reads as follows:

Sec. 39.  TIME OF TAKING EFFECT OF LAWS; EMERGENCIES; ENTRY ON JOURNAL. No law passed by the Legislature, except the general appropriation act, shall take effect or go into force until ninety days after the adjournment of the session at which it was enacted, unless the Legislature shall, by a vote of two-thirds of all the members elected to each House, otherwise direct; said vote to be taken by yeas and nays, and entered upon the journals.

 

This constitutional provision, which the legislature can not change, means that unless a windstorm bill is passed that is acceptable to two thirds of both houses, it will not take effect until about September 1, 2013, well into hurricane season.  And that means even if a bill is passed — but passed by less than the constitutionally required super-majority —  all that stands between the weather and a major problem in Texas between now and September could well be less than $1 billion.  If so, Texas runs the serious risk of an insolvent insurer that covers 62% of the exposure for real property — residences, businesses, government facilities — unable to pay claims.  Without making things too scary, it might not be able to pay even 50% of clams.

This means two things.

Thing 1) All sides of this debate need to have some flexibility and take very seriously their obligations as legislators.  If there is deadlock, or even if there is simply less than a super-majority in favor of one bill, legislators might consider lowering the stakes.  If you can’t get a really good bill — and I fear that is probably where we are right now — put something in place that people can be confident will not be etched in stone. I would suggest that either of the two alternative “minmalist, last-minute fixes” I proposed this month qualify. But there are alternatives that might also suffice.

Thing 2) If no bill passes or a bill passes without two-thirds support, we need to turn urgent attention to what is actually going on in TWIA.  It is attempting to obtain a pre-event “Bond Anticipation Note” so that they would at least have about $700 million with which to pay claims on their $70 billion plus of total exposure.  Without that, we are down to a Catastrophe Reserve Fund that stands at $180 million and possibly less in light of both continuing Ike litigation and some severe storms this past month. We also need to pay heightened attention to TWIA’s efforts to obtain reinsurance — and the terms of that reinsurance. The details matter here.  Where will the reinsurance attach?  Will it leave a gap?  Does the reinsurance cover one storm (occurrence) or does it permit “reinstatement” — an ability to cover multiple storms, although possibly for an additional premium.  And how much will an over-a-barrel TWIA have to pay to the reinsurance industry, which has historically charged prices of five times the expected value of risk assumed, under these circumstances?  Every dollar spent is one less dollar available for succeeding years.

So, high stakes in the days ahead. We’ll keep a watch out and I urge you to make sure your legislators understand the importance of the issues here both for the Texas coast and in the rest of the state.

Live Blog of Texas Senate session of May 14, 2013

Catrisk will be attempting to live blog the Texas Senate session today that starts at 11 a.m. You can access the video here.  I can’t promise I’ll be able to do the entire session as various day job events may intervene. I have no idea if S.B. 1700 will come up today and, if so, what amendments might be proposed.  I can say that my “Minimalist Fix” post has gotten an awful lot of hits in the past few days.

15.00

So, nothing happened on windstorm insurance on the floor of the Texas Senate today.  The one thing perhaps everyone could agree on is that time is running out to change anything in this regular session of the 83rd Legislature.

12.40

They are recessing until 2:15.  The Senate Business and Commerce meeting will have a meeting at Chairman Carona’s desk during the recess.  I have no idea what they will discuss.

Unfortunately, my day job is likely to prevent me from keeping even half an eye on the Senate for the next several hours, so you are all on your own for a bit.

12.20

Might be oyster and shrimp lunch time because nothing has happened on the Senate floor for quite some time.  Oh, wait. They just started up again.  But they are just reading and referring House bills to Senate committees.

11.58

Senate back considering bills, but not (yet) S.B. 1700.  The current one, on toll road conversion, is generating some actual comment.

11.31

They are into announcements rather than bill consideration.  But the chair indicates there may be additional bills to be heard today.

11.20

Senator Royce West certainly gets his colleagues’ attention by saying he was adding billion to the cost of a bill on digitizing filings in civil lawsuits.  Just kidding.

10.51

Senator Larry Taylor, sponsor of SB 1700, is now speaking, but not on Windstorm Insurance. Instead, he is talking about CSSB 1560 involving easements.

10.49

Chair says, “Members, that concludes the morning call.” Looks as if they are now taking up substantive bills.

Screenshot_5_15_13_11_46_AM

10.40

Oyster and shrimp lunch for legislators being discussed.  No Windstorm bill yet.

11.42

Senate recesses until 11 a.m. Wednesday, May 15, 2013.  Still no S.B. 1700.

11.22

Reading and referring various bills to committees.  Does this mean voting on bills out of committee is over for today?

11.03

Actual debate on the floor. Not about windstorm insurance but about the right to marry.  And not about gay marriage but about photo identification. Should one need photo identification as a prerequisite to marriage?

10.44

Not that it has anything to do with windstorm insurance, but an interesting bill for insurance junkies on subrogation rights and the “make whole doctrine”.  H.B. 1869.  I’ll have to read it.

10.35

Now calling bills for review.  So the procedure seems to be

1) Suspend regular order of business so that the bill can be considered “out of order”; Vote on this.

2) Floor amendments offered and voted on.

3) Move passage to third reading.

4) Motion to suspend the 3 day delay between second and third reading

5) Third reading of bill (just caption)

6) Motion for final passage.  Roll call vote.

10.09

Session begins.

10.01

Upbeat music now playing heralding the possible start of session.  Also, please note that due to some issue with my liveblogging software, the time stamps are an hour off.  So, if this says 10:02 I believe it means 11:02.

09.58

Nothing happening.  Various people milling around.  No sound, but I am hoping that is because the microphones are off rather than any issues with my Internet feed.

13.35

Motion to adjourn until tomorrow. Passes.  So no S.B. 1700 today. #SB1700 #TWIA

13.34

Motions being heard to suspend Senate rules to permit announcements of urgent committee meetings.  No sign of S.B. 1700.

13.31

I get the sense that if you watched this Internet broadcast for a few days you might actually understand Senate procedure pretty well.

13.26

Wow, things move fast once they get to the Senate floor.  My sense is that everything is negotiated out ahead of time off the floor.  Still no sign of S.B. 1700.  We are hearing reading and referral of various bills.

16.09

The TWIA board today decided not to decide whether to consent to a receivership, tabling the idea until its May meeting.  That leaves the ball back in the court of Texas Insurance Commissioner Eleanor Kitzman, who can try to throw TWIA into receivership without TWIA’s consent.

A symbolic representation of the actions of TWIA's board today

A pictographic representation of the actions of TWIA’s board today

This is also the end of the live blog experiment.  It went well until my feed went out.  Next on the agenda, hearings in Austin on SB 1089 that would “fix” TWIA by placing more of the burden on people who don’t have real estate on the coast.

14.50

Alas, I must deal with reality and stop watching the blank screen.  If they’re still on when I return, I’ll live blog some more.  Otherwise, we’ll skip the play by play and go to some analysis at the end of the day.  Thanks for viewing.

14.24

While we’ve been waiting, I got a phone call from another attorney who had evidently been retained to examine the possibility of TWIA making an assessment under the old law.  Looks like that attorney, examining the issue independently, was likewise extremely dubious about making an assessment under 2210.058. #twia. Lots of hurt, but I still don’t see any cavalry coming over the hill.

14.21

No longer getting the error message and the little timer at the bottom says 2:25, so maybe my feed is back but they are still speaking to their attorneys.  Would not be surprised if this took a lot of discussion since they will basically be consenting to putting themselves out of business. #twia

14.07

Just got a tweet saying they are still in closed session.  So there is some hope that the video feed will emerge from what may be mere hibernation.  I am also advised that the audience has, quite literally, been left in the cold. #overairconditioning #twia

14.00

Still no connection to the TWIA video server.

13.45

I fear I have lost my feed of the meeting. Getting the mysterious Error 0-3222 message.

13.39

One of the matters brought up by Greg Smith of the Coastal Task Force was whether TWIA was being treated equivalently to the Texas FAIR plan, a sister government-sponsored insurance company. He contended, I believe, that the FAIR plan was likewise insolvent but was not being put into receivership.  This issue was also brought up by TWIA with TDI, but the TDI representative said she did not know if the FAIR plan was insolvent.

So, although I can’t find a 2012 financial statement on the Web for the FAIR plan (hmm?), I can find a 2011 financial. It apparently shows that the FAIR plan was million in the red. It may be, however, that TDI thought that the FAIR plan could work its way out of this negative position.  Whether that occurred, I don’t know either.

Oh. Seeing some action on the video screen for the meeting.

13.29

I just posted an excerpt of the letter from Rep. Deshotel. I now see, by the way, that the letter was signed by State Representatives Joe Deshotel (District 22), Craig Eiland (District 23), Abel Herrero (District 34), Todd Hunter (District 32), Eddie Lucio III (District 38) and Allan Ritter (District 21). This is the only thing even close to a legal argument I have found explaining how TWIA could recapitalize and avoid receivership by assessing insurers under the old statute. But, as the letter concedes, former Commissioner Geeslin did not actually say that TWIA could assess the insurance industry under the old law (although he does, I agree, come close to doing so).  But this is what good old Latin-liking lawyers call an “ipse dixit.”  That’s the fancy term for, “because I said so.”  It’s not a legal argument.  There is no evidence that former Commissioner Geeslin confronted section 44(2) of HB 4409 and had a theory for how the word “repeal” does not mean exactly what it says.  Section 2210.058 of the old law was the provision that permitted insurer assessments — and that statute was repealed four years ago in HB 4409.

Now, the more interesting question — one also raised by some of the public comment —  is whether the State Representatives are trying to set up some kind of lawsuit against someone for failure to assess adequately while the old law was in effect.  Such a lawsuit, however, is problematic in that, even if it prevails, which would likely be an uphill struggle, how is anyone going to pay a judgment?  Moreover, I suspect TWIA board members will find at least qualified immunity from suit, will be able to argue that they thought the assessment was adequate, and will question standing and duties.  Don’t count on such a lawsuit fixing TWIA ever — and certainly not in the short run. And short, in this context, means at least three hurricane seasons’ worth.

13.18

The Deshotel letter key paragraph

The Deshotel letter key paragraph

13.15

So, let’s go to the halftime report.

We need to separate out the harm caused by TWIA being insolvent from TWIA being put into receivership.  TWIA’s insolvency is a real problem in that it means, if the accountants are correct, that TWIA does not have enough money to pay claims and that it does not anticipate enough money to do so through the end of this year even if there is no significant storm. It is just fascinating that this singular fact does not appear to bother any of the speakers from the coast who came to the hearing today. Instead, the focus is on receivership.  Why? Do they think that grab law, which is the alternative to receivership, is an improvement?

The best arguments against receivership were that it might hurt the ability to obtain a Bond Anticipation Note secured by the potential for Class 1 securities being issued and that it might possibly hurt issuance of Class 2 and 3 securities. But the empirical evidence on this point is awfully thin.  It is not clear that a BAN could be issued anyway or that a post-petition receivership would hurt rather than help short term bond creditors.

The other thing that I think is clear is that the TDI Commissioner is going to act swiftly here.  She has a first mover advantage and does not need the TWIA board’s cooperation. TWIA’s board can cooperate, which might matters go more swiftly and less expensively, or it can make some short term political hay by opposition.  But what would it really accomplish except make some people who have demonized the incumbent insurance commissioner feel better in the short run?

The other matter I wonder about is seeing this as just one move in the Austin chess game about how TWIA is going to be restructured or depopulated.  Does the fact that it is in receivership help the argument to move towards an assigned risk plan as in HB 18? And maybe that is what this is all about.  If TWIA has “failed,” then the case for propping it up may look weaker and the case for going to something significantly different, a market oriented assigned risk plan may look stronger.

And, by the way, we are now on minute 10 of the 5 minute break.

13.04

TWIA goes into a closed session at 2:05. Apparently just a 5 minute break.  Except that in my experience one should add a zero to declared break times.   Anyway, we are done with Round 1.

13.03

TDI: Why is receivership in best interests in policyholders. TWIA does not have enough assets to pay its liabilities. Current claimants may not get claims paid fully. Make sure that actual damages being sustained are given priority. [Over what? Extra-contractuals?]

TDI: We are ready to move quickly in court. But stakeholders can have input through court process. File your plan and set a hearing.  At TDI, we try to be ready for all scenarios. [i.e. they are writing a plan]/

 

13.00

TWIA: Who is this rehabilitator? Why does TDI think that the rehabilitator can do a better job than this board.

TDI: Insurance Commissioner appointed as receiver but a competitive bid to find a manager. We can get someone on an interim emergency basis.  There are better statutory remedies in receivership. [Like not pay claims in full!]

12.58

TDI: Rehabilitation stays and centralizes lawsuits [just like federal bankruptcy].

TWIA: What can we assume with Class 1 bonds in designing reinsurance program. Looks encouraging that we can get a 0 million BAN to help reinsurance. But receivership would make that harder said the TPFA folks [I think I have this comment correctly] TPFA said it had offer from Bank of America, though at a higher price tag. [This is an important issue]

TDI: We would be moving in and out quickly. TDI  has concerns about ability to issue BAN anyway given negative surplus. [Darned straight].

12.55

TWIA: Effect on mortgages and covenants

TDI: Freddie and Fannie accept residual market insurance.  Ratings relate to private insurers.  [So is she saying all is well with mortgagees].

TWIA: What about residual markets in rehab.

TDI: Can’t predict what they would do. They have had conversations.

12.53

TWIA: Why now?

TDI: 4th quarter statement. Additional litigation that created a negative surplus. And no realistic opportunity to earn its way out. Rehabilitation would not inhibit vital reform measures on the table.

TWIA: Impact on reinsurance purchase? And post-event bonds?

TDI: Receivership can definitely create challenges. We will get a plan on file very quickly. Receivers can purchase reinsurance. The goal would be to get out of rehabilitation quickly. [Don’t bet on this occurring]. Work with bond market and see what we could do. [Vague]

 

12.51

TWIA: What happens to this board if TDI puts TWIA in receivership?

TDI: Board would be suspended and the rehabilitator would operate with the power of the Board. Board could be reconstituted after emergence.

TWIA: We’ve been in administrative oversight.  We have limited authority. Why the need for this board to consent?

TDI: Things move quicker when there is consent. If rehabilitation were consented to, there would be less disruption. On the same day, the AG can go to court, enter a rehabilitation application and enter a rehabilitation order almost simultaneously. We would soon have a rehabilitation plan. Fears would be quelled. If we have a contest, there will be more uncertainty and delay. At TDI, lack of disruption is important.

TWIA: A lot of the testimony we have heard today about nervousness of bankers etc. — at least there would be a plan to take care of it.

TDI: Yes.

12.48

TDI: Being back to zero balance would be enough to get it out of receivership.

TDI (Jamie Walker). Based on projections for TWIA income there will still be negative surplus at the end of this year.  And this is in case there are no “hiccups” [like a hailstorm?].

TWIA: Is the FAIR plan insolvent? It too has a negative surplus.

TDI: I don’t know.

12.46

TDI: Rates would be continued under the current statute, unless laws are specifically changed.  [TDI being very careful and lawyerly in its answers.  Lawyerly used as a positive adjective here].

TWIA: What would be the standard to get TWIA out of rehabilitation given that TWIA is not generally supposed to have surplus.

TDI: TWIA is not required to have an excess of surplus. TDI lawyer specifying basis for receivership. Insufficient assets, not an inability to pay bills.

12.43

TWIA: that paints a pretty rosy picture.  What other states did you look at?

TDI: More than 25 states have this law.  Modeled it after NAIC act.

TDI: Rehab has not been used in the residual market before.

TDI: Process depends on specific case. If something were to happen, we would move very expeditiously. Move to rehabilitation. Rehab order by the court. Rehabilitator would file a rehab plan within one year, but it could be done in a matter of days. How were claims going to be paid and what the process would be.

12.41

TDI has no specific comment, but available to answer questions.

TWIA Board now asking questions. Receivership has a stigma. Could TDI  talk through pros and cons of receivership?

TDI: Two types of receivership. Rehabilitation and liquidation. Rehab akin to a Chapter 11 in bankruptcy. Purpose is to revitalize an insurer so it can go into the marketplace. Company can pay claims, issue policies, without market disruption.

12.38

Public comment over. Moving on. Consideration of following topics: Review options for addressing financial condition of Association.  Including receivership. Notes representation from TDI.

12.37

Eddie Cabazos — Item on agenda to go into closed session. Is that not a violation of the open meeting act? [No.]

Answer — The Open Meetings law requires final action to be taken in open session. but advice of counsel can cause a closed session.

12.35

Tom Tagliabue, Government relations person for the City of Corpus Christi. Also opposed to receivership.

12.35

Joe Vega, Mayor of City of Port Isabel [again apologies for misspelling of names].  Will hurt small businesses.

Mr. William Goldsten, Corpus Christi — Negative economic impacts to engineering and construction profession along the Gulf Coast. [You know, these are probably all fine people, but that is not the issue.  The issue is whether receivership is the best way to address TWIA insolvency.  The fact that the legislature is in session is relevant, but not dispositive.  Grab law is the alternative to receivership.  Receivership is really a code word for insolvency.  In law school, we call this argumentative technique, “fighting the hypothetical] It will create chaos along the coast. #twia. Reduce the discrimination against the coast.

12.31

Eric Sandberg, Texas Banker’s Association — We need to have viable insurance in place, particularly from a regulatory standpoint.

12.30

Eric Sanburg, Texas Banker’s Association — skipped

David Garza, Cameron County.  [Ever get the sense this might be a bit one-sided presentation of commentary?  Looks like the coast, whose ox appears gored, has gotten its political act together whereas diffuse other constituencies have not]. Receivership is not the answer.  Let the legislature do its job. If we don’t get adequate results from this legislative session, do what it takes to make us solvent.  Our bankers and mortgage holders are nervous. [Let alone homeowners and businesses!]

12.27

Foster Edwards, the Corpus Christi Chamber of Commerce. CCCofC has been working with TWIA staff for years. A “bonehead idea, frankly.” Expressed well in letter on page E4 of packet, signed by four state representatives. [Is this the Deshotel letter that I just posted to this blog.]

12.24

Mr. Perkins with the Coastal Windstorm Taskforce: Mayor of Ingleside. We speak with one voice in opposition to go into receivership.  Again the argument that assessments are available.  [Has it occurred to anyone to actually read the statute?]  Development will be hurt. [Maybe industry could pay people extra to help purchase insurance?] Let the legislature do its job. Create a transition from TWIA to some other entity but not an instant effect on the market.

12.22

Charlie Zahn, Coastal Windstorm Taskforce: Close to matching up bills for final consideration by Senate. [Really?]  Legislative process needs to take care of this issue. Receivership implies TWIA does not have the ability to pay its bills in the future. You don’t have the basis for receivership. Trust fund in place.  You have the ability to assess. [HOW??] We are a viable entity. #twia. Already had a negative impact on Texas coast, including banks. [Probably true] Can they continue to provide mortgage loans. [Yes, a legitimate concern.  But is it receivership that is causing the problem or the insolvency.]

12.18

Greg Smith, Coastal Taskforce: Question of solvency should be judged as a residual carrier, not as a private insurer.  There are other residual carriers that are much worse off than TWIA.  National Flood, New Jersey FAIR Plan and Louisiana FAIR plan are worse off. Yet no question about their solvency. Will send messages to other carriers across the nation.  Rating agencies say you don’t have to have positive surplus.  [The everyone is doing it defense?]

12.16

Anne Vaughan, Port Aransas Chamber of Commerce [my apologies for any misspelled names]. Oppose what is “nothing more than an insane idea.” [Why is it insane to put an insolvent entity into receivership? Kubler-Ross stages of grief comes to mind. Denial. Anger] Has unconfirmed Commissioner of Insurance thought this through? TWIA is our only source of insurance. [But if it were not, one would never know if TWIA premiums were too low]

12.13

TWIA board member distinguishing between comments of TWIA and comments of TDI.

12.12

Joe McComb of Nueces County: Precinct 4.  The fun part of Nueces County. I do know people are concerned about coverage.  If they’ve got TWIA, they’ve shopped coverage and they have no alternative.  Worried that the decision has been made. [Yup]  Give legislature 60 days to solve this problem.  Good part of having a crisis is that the legislature is in session.  Place faith in elected officials. It will take 60-120 days to implement receivership anyway.  [Most persuasive speaker so far].

12.09

Keith McMullen with Port Aransas: Mayor of Port Aransas. Please don’t pursue receivership. Don’t case doubt on insurance market on the coast. Already created nervousness.

12.08

Schlitterbahn Waterpark representative speaks:  How will receivership impact existing contracts with lenders and vendors? TWIA receivership creates uncertainty that will chill business. [True, but what is the alternative if TWIA is insolvent? — SJC]. Before TWIA placed in receivership, other funding alternatives should be explored. [Like what? Assessments?]  My editorial comments are in brackets.

12.06

Jim Rich of Beaumont Chamber of Commerce: Very concerned about receivership. Notes importance of coast to economy. Wants a legislative solution. Let the legislative process work.  [But what if nothing happens? — SJC]

12.03

Public comment limited to 3 minutes with a timer. No more than 30 minutes to public comment period before moving to the rest of the agenda.

12.01

Calling roll

11.59

If you can see this it is a part of Rep. Deshotel’s letter.   It’s the first inkling of any legal theory behind the idea that TWIA can still asess for Ike.  Don’t expect insurers to buy it.geeslin assessment theory

11.55

Meeting is beginning.  One can see people milling on the video.

11.53

Channel 12 News (Beaumont) reports that State Representative Joe Deshotel has issued a press release opposing placement into receivership. Add him to the list of people whom I believe are mistaken on the law.  Here’s what he says in his letter:

If the Board would simply follow the law in place for these 2008 policies by assessing the insurance companies and moving the premium money to the Trust Fund, which currently has 8 million, TWIA would have over 5 million, which is hundreds of millions more (50%) than the Trust Fund has ever had!

11.50

Rick Spruill of the Corpus Christi Caller posted a preview of today’s meeting about 20 minutes ago.

11.46

In theory, you should also be able to follow this blog on Twitter using the hashtag #twia

11.40

Here some issues I expect to hear discussed at the meeting:

1) Is TWIA really as insolvent as its annual statement asserts (i.e. 3 million in the hole).  There are occasionally discretionary choices that get made in insurance accounting.  And there are occasionally mistakes.  Does anyone have a credible argument that TWIA is not seriously insolvent?

2) Assuming TWIA is insolvent, what, if anything, is the real alternative to a receivership?  When an entity is insolvent, as TWIA apparently is, that means some creditors can not be paid in full. If you fail to create an orderly process to pay claims, it means that the entity gets taken apart piecemeal and that different creditors are randomly (or systematically) treated worse than they should be. This is why we have insolvency law and (in most instances) bankruptcy law. Why should TWIA be treated differently?

3) Is there any authority as several coastal politicians have maintained to help TWIA out by assessing insurers for losses attributable to Hurricane Ike?  This blog has repeatedly maintained here, here and here that there is no such legal authority and that the old legal authority, section 2210.058 of the Insurance Code, was repealed in 2009.  Let’s see if there is anything more than denial or bluster behind the claim that TWIA can assess insurers without there being a new storm that would justify the issuance of public securities?

Live blog of Texas Senate on S.B. 1700 — or, as it turns out, not

This is a placeholder in the event the Texas Senate takes up S.B. 1700 this afternoon.  No guarantees that anything will be here, but matters seem to move swiftly in the Texas Senate, so I am setting things up ahead of time.

15.00

So, nothing happened on windstorm insurance on the floor of the Texas Senate today.  The one thing perhaps everyone could agree on is that time is running out to change anything in this regular session of the 83rd Legislature.

12.40

They are recessing until 2:15.  The Senate Business and Commerce meeting will have a meeting at Chairman Carona’s desk during the recess.  I have no idea what they will discuss.

Unfortunately, my day job is likely to prevent me from keeping even half an eye on the Senate for the next several hours, so you are all on your own for a bit.

12.20

Might be oyster and shrimp lunch time because nothing has happened on the Senate floor for quite some time.  Oh, wait. They just started up again.  But they are just reading and referring House bills to Senate committees.

11.58

Senate back considering bills, but not (yet) S.B. 1700.  The current one, on toll road conversion, is generating some actual comment.

11.31

They are into announcements rather than bill consideration.  But the chair indicates there may be additional bills to be heard today.

11.20

Senator Royce West certainly gets his colleagues’ attention by saying he was adding billion to the cost of a bill on digitizing filings in civil lawsuits.  Just kidding.

10.51

Senator Larry Taylor, sponsor of SB 1700, is now speaking, but not on Windstorm Insurance. Instead, he is talking about CSSB 1560 involving easements.

10.49

Chair says, “Members, that concludes the morning call.” Looks as if they are now taking up substantive bills.

Screenshot_5_15_13_11_46_AM

10.40

Oyster and shrimp lunch for legislators being discussed.  No Windstorm bill yet.

11.42

Senate recesses until 11 a.m. Wednesday, May 15, 2013.  Still no S.B. 1700.

11.22

Reading and referring various bills to committees.  Does this mean voting on bills out of committee is over for today?

11.03

Actual debate on the floor. Not about windstorm insurance but about the right to marry.  And not about gay marriage but about photo identification. Should one need photo identification as a prerequisite to marriage?

10.44

Not that it has anything to do with windstorm insurance, but an interesting bill for insurance junkies on subrogation rights and the “make whole doctrine”.  H.B. 1869.  I’ll have to read it.

10.35

Now calling bills for review.  So the procedure seems to be

1) Suspend regular order of business so that the bill can be considered “out of order”; Vote on this.

2) Floor amendments offered and voted on.

3) Move passage to third reading.

4) Motion to suspend the 3 day delay between second and third reading

5) Third reading of bill (just caption)

6) Motion for final passage.  Roll call vote.

10.09

Session begins.

10.01

Upbeat music now playing heralding the possible start of session.  Also, please note that due to some issue with my liveblogging software, the time stamps are an hour off.  So, if this says 10:02 I believe it means 11:02.

09.58

Nothing happening.  Various people milling around.  No sound, but I am hoping that is because the microphones are off rather than any issues with my Internet feed.

13.35

Motion to adjourn until tomorrow. Passes.  So no S.B. 1700 today. #SB1700 #TWIA

13.34

Motions being heard to suspend Senate rules to permit announcements of urgent committee meetings.  No sign of S.B. 1700.

13.31

I get the sense that if you watched this Internet broadcast for a few days you might actually understand Senate procedure pretty well.

13.26

Wow, things move fast once they get to the Senate floor.  My sense is that everything is negotiated out ahead of time off the floor.  Still no sign of S.B. 1700.  We are hearing reading and referral of various bills.

16.09

The TWIA board today decided not to decide whether to consent to a receivership, tabling the idea until its May meeting.  That leaves the ball back in the court of Texas Insurance Commissioner Eleanor Kitzman, who can try to throw TWIA into receivership without TWIA’s consent.

A symbolic representation of the actions of TWIA's board today

A pictographic representation of the actions of TWIA’s board today

This is also the end of the live blog experiment.  It went well until my feed went out.  Next on the agenda, hearings in Austin on SB 1089 that would “fix” TWIA by placing more of the burden on people who don’t have real estate on the coast.

14.50

Alas, I must deal with reality and stop watching the blank screen.  If they’re still on when I return, I’ll live blog some more.  Otherwise, we’ll skip the play by play and go to some analysis at the end of the day.  Thanks for viewing.

14.24

While we’ve been waiting, I got a phone call from another attorney who had evidently been retained to examine the possibility of TWIA making an assessment under the old law.  Looks like that attorney, examining the issue independently, was likewise extremely dubious about making an assessment under 2210.058. #twia. Lots of hurt, but I still don’t see any cavalry coming over the hill.

14.21

No longer getting the error message and the little timer at the bottom says 2:25, so maybe my feed is back but they are still speaking to their attorneys.  Would not be surprised if this took a lot of discussion since they will basically be consenting to putting themselves out of business. #twia

14.07

Just got a tweet saying they are still in closed session.  So there is some hope that the video feed will emerge from what may be mere hibernation.  I am also advised that the audience has, quite literally, been left in the cold. #overairconditioning #twia

14.00

Still no connection to the TWIA video server.

13.45

I fear I have lost my feed of the meeting. Getting the mysterious Error 0-3222 message.

13.39

One of the matters brought up by Greg Smith of the Coastal Task Force was whether TWIA was being treated equivalently to the Texas FAIR plan, a sister government-sponsored insurance company. He contended, I believe, that the FAIR plan was likewise insolvent but was not being put into receivership.  This issue was also brought up by TWIA with TDI, but the TDI representative said she did not know if the FAIR plan was insolvent.

So, although I can’t find a 2012 financial statement on the Web for the FAIR plan (hmm?), I can find a 2011 financial. It apparently shows that the FAIR plan was million in the red. It may be, however, that TDI thought that the FAIR plan could work its way out of this negative position.  Whether that occurred, I don’t know either.

Oh. Seeing some action on the video screen for the meeting.

13.29

I just posted an excerpt of the letter from Rep. Deshotel. I now see, by the way, that the letter was signed by State Representatives Joe Deshotel (District 22), Craig Eiland (District 23), Abel Herrero (District 34), Todd Hunter (District 32), Eddie Lucio III (District 38) and Allan Ritter (District 21). This is the only thing even close to a legal argument I have found explaining how TWIA could recapitalize and avoid receivership by assessing insurers under the old statute. But, as the letter concedes, former Commissioner Geeslin did not actually say that TWIA could assess the insurance industry under the old law (although he does, I agree, come close to doing so).  But this is what good old Latin-liking lawyers call an “ipse dixit.”  That’s the fancy term for, “because I said so.”  It’s not a legal argument.  There is no evidence that former Commissioner Geeslin confronted section 44(2) of HB 4409 and had a theory for how the word “repeal” does not mean exactly what it says.  Section 2210.058 of the old law was the provision that permitted insurer assessments — and that statute was repealed four years ago in HB 4409.

Now, the more interesting question — one also raised by some of the public comment —  is whether the State Representatives are trying to set up some kind of lawsuit against someone for failure to assess adequately while the old law was in effect.  Such a lawsuit, however, is problematic in that, even if it prevails, which would likely be an uphill struggle, how is anyone going to pay a judgment?  Moreover, I suspect TWIA board members will find at least qualified immunity from suit, will be able to argue that they thought the assessment was adequate, and will question standing and duties.  Don’t count on such a lawsuit fixing TWIA ever — and certainly not in the short run. And short, in this context, means at least three hurricane seasons’ worth.

13.18

The Deshotel letter key paragraph

The Deshotel letter key paragraph

13.15

So, let’s go to the halftime report.

We need to separate out the harm caused by TWIA being insolvent from TWIA being put into receivership.  TWIA’s insolvency is a real problem in that it means, if the accountants are correct, that TWIA does not have enough money to pay claims and that it does not anticipate enough money to do so through the end of this year even if there is no significant storm. It is just fascinating that this singular fact does not appear to bother any of the speakers from the coast who came to the hearing today. Instead, the focus is on receivership.  Why? Do they think that grab law, which is the alternative to receivership, is an improvement?

The best arguments against receivership were that it might hurt the ability to obtain a Bond Anticipation Note secured by the potential for Class 1 securities being issued and that it might possibly hurt issuance of Class 2 and 3 securities. But the empirical evidence on this point is awfully thin.  It is not clear that a BAN could be issued anyway or that a post-petition receivership would hurt rather than help short term bond creditors.

The other thing that I think is clear is that the TDI Commissioner is going to act swiftly here.  She has a first mover advantage and does not need the TWIA board’s cooperation. TWIA’s board can cooperate, which might matters go more swiftly and less expensively, or it can make some short term political hay by opposition.  But what would it really accomplish except make some people who have demonized the incumbent insurance commissioner feel better in the short run?

The other matter I wonder about is seeing this as just one move in the Austin chess game about how TWIA is going to be restructured or depopulated.  Does the fact that it is in receivership help the argument to move towards an assigned risk plan as in HB 18? And maybe that is what this is all about.  If TWIA has “failed,” then the case for propping it up may look weaker and the case for going to something significantly different, a market oriented assigned risk plan may look stronger.

And, by the way, we are now on minute 10 of the 5 minute break.

13.04

TWIA goes into a closed session at 2:05. Apparently just a 5 minute break.  Except that in my experience one should add a zero to declared break times.   Anyway, we are done with Round 1.

13.03

TDI: Why is receivership in best interests in policyholders. TWIA does not have enough assets to pay its liabilities. Current claimants may not get claims paid fully. Make sure that actual damages being sustained are given priority. [Over what? Extra-contractuals?]

TDI: We are ready to move quickly in court. But stakeholders can have input through court process. File your plan and set a hearing.  At TDI, we try to be ready for all scenarios. [i.e. they are writing a plan]/

 

13.00

TWIA: Who is this rehabilitator? Why does TDI think that the rehabilitator can do a better job than this board.

TDI: Insurance Commissioner appointed as receiver but a competitive bid to find a manager. We can get someone on an interim emergency basis.  There are better statutory remedies in receivership. [Like not pay claims in full!]

12.58

TDI: Rehabilitation stays and centralizes lawsuits [just like federal bankruptcy].

TWIA: What can we assume with Class 1 bonds in designing reinsurance program. Looks encouraging that we can get a 0 million BAN to help reinsurance. But receivership would make that harder said the TPFA folks [I think I have this comment correctly] TPFA said it had offer from Bank of America, though at a higher price tag. [This is an important issue]

TDI: We would be moving in and out quickly. TDI  has concerns about ability to issue BAN anyway given negative surplus. [Darned straight].

12.55

TWIA: Effect on mortgages and covenants

TDI: Freddie and Fannie accept residual market insurance.  Ratings relate to private insurers.  [So is she saying all is well with mortgagees].

TWIA: What about residual markets in rehab.

TDI: Can’t predict what they would do. They have had conversations.

12.53

TWIA: Why now?

TDI: 4th quarter statement. Additional litigation that created a negative surplus. And no realistic opportunity to earn its way out. Rehabilitation would not inhibit vital reform measures on the table.

TWIA: Impact on reinsurance purchase? And post-event bonds?

TDI: Receivership can definitely create challenges. We will get a plan on file very quickly. Receivers can purchase reinsurance. The goal would be to get out of rehabilitation quickly. [Don’t bet on this occurring]. Work with bond market and see what we could do. [Vague]

 

12.51

TWIA: What happens to this board if TDI puts TWIA in receivership?

TDI: Board would be suspended and the rehabilitator would operate with the power of the Board. Board could be reconstituted after emergence.

TWIA: We’ve been in administrative oversight.  We have limited authority. Why the need for this board to consent?

TDI: Things move quicker when there is consent. If rehabilitation were consented to, there would be less disruption. On the same day, the AG can go to court, enter a rehabilitation application and enter a rehabilitation order almost simultaneously. We would soon have a rehabilitation plan. Fears would be quelled. If we have a contest, there will be more uncertainty and delay. At TDI, lack of disruption is important.

TWIA: A lot of the testimony we have heard today about nervousness of bankers etc. — at least there would be a plan to take care of it.

TDI: Yes.

12.48

TDI: Being back to zero balance would be enough to get it out of receivership.

TDI (Jamie Walker). Based on projections for TWIA income there will still be negative surplus at the end of this year.  And this is in case there are no “hiccups” [like a hailstorm?].

TWIA: Is the FAIR plan insolvent? It too has a negative surplus.

TDI: I don’t know.

12.46

TDI: Rates would be continued under the current statute, unless laws are specifically changed.  [TDI being very careful and lawyerly in its answers.  Lawyerly used as a positive adjective here].

TWIA: What would be the standard to get TWIA out of rehabilitation given that TWIA is not generally supposed to have surplus.

TDI: TWIA is not required to have an excess of surplus. TDI lawyer specifying basis for receivership. Insufficient assets, not an inability to pay bills.

12.43

TWIA: that paints a pretty rosy picture.  What other states did you look at?

TDI: More than 25 states have this law.  Modeled it after NAIC act.

TDI: Rehab has not been used in the residual market before.

TDI: Process depends on specific case. If something were to happen, we would move very expeditiously. Move to rehabilitation. Rehab order by the court. Rehabilitator would file a rehab plan within one year, but it could be done in a matter of days. How were claims going to be paid and what the process would be.

12.41

TDI has no specific comment, but available to answer questions.

TWIA Board now asking questions. Receivership has a stigma. Could TDI  talk through pros and cons of receivership?

TDI: Two types of receivership. Rehabilitation and liquidation. Rehab akin to a Chapter 11 in bankruptcy. Purpose is to revitalize an insurer so it can go into the marketplace. Company can pay claims, issue policies, without market disruption.

12.38

Public comment over. Moving on. Consideration of following topics: Review options for addressing financial condition of Association.  Including receivership. Notes representation from TDI.

12.37

Eddie Cabazos — Item on agenda to go into closed session. Is that not a violation of the open meeting act? [No.]

Answer — The Open Meetings law requires final action to be taken in open session. but advice of counsel can cause a closed session.

12.35

Tom Tagliabue, Government relations person for the City of Corpus Christi. Also opposed to receivership.

12.35

Joe Vega, Mayor of City of Port Isabel [again apologies for misspelling of names].  Will hurt small businesses.

Mr. William Goldsten, Corpus Christi — Negative economic impacts to engineering and construction profession along the Gulf Coast. [You know, these are probably all fine people, but that is not the issue.  The issue is whether receivership is the best way to address TWIA insolvency.  The fact that the legislature is in session is relevant, but not dispositive.  Grab law is the alternative to receivership.  Receivership is really a code word for insolvency.  In law school, we call this argumentative technique, “fighting the hypothetical] It will create chaos along the coast. #twia. Reduce the discrimination against the coast.

12.31

Eric Sandberg, Texas Banker’s Association — We need to have viable insurance in place, particularly from a regulatory standpoint.

12.30

Eric Sanburg, Texas Banker’s Association — skipped

David Garza, Cameron County.  [Ever get the sense this might be a bit one-sided presentation of commentary?  Looks like the coast, whose ox appears gored, has gotten its political act together whereas diffuse other constituencies have not]. Receivership is not the answer.  Let the legislature do its job. If we don’t get adequate results from this legislative session, do what it takes to make us solvent.  Our bankers and mortgage holders are nervous. [Let alone homeowners and businesses!]

12.27

Foster Edwards, the Corpus Christi Chamber of Commerce. CCCofC has been working with TWIA staff for years. A “bonehead idea, frankly.” Expressed well in letter on page E4 of packet, signed by four state representatives. [Is this the Deshotel letter that I just posted to this blog.]

12.24

Mr. Perkins with the Coastal Windstorm Taskforce: Mayor of Ingleside. We speak with one voice in opposition to go into receivership.  Again the argument that assessments are available.  [Has it occurred to anyone to actually read the statute?]  Development will be hurt. [Maybe industry could pay people extra to help purchase insurance?] Let the legislature do its job. Create a transition from TWIA to some other entity but not an instant effect on the market.

12.22

Charlie Zahn, Coastal Windstorm Taskforce: Close to matching up bills for final consideration by Senate. [Really?]  Legislative process needs to take care of this issue. Receivership implies TWIA does not have the ability to pay its bills in the future. You don’t have the basis for receivership. Trust fund in place.  You have the ability to assess. [HOW??] We are a viable entity. #twia. Already had a negative impact on Texas coast, including banks. [Probably true] Can they continue to provide mortgage loans. [Yes, a legitimate concern.  But is it receivership that is causing the problem or the insolvency.]

12.18

Greg Smith, Coastal Taskforce: Question of solvency should be judged as a residual carrier, not as a private insurer.  There are other residual carriers that are much worse off than TWIA.  National Flood, New Jersey FAIR Plan and Louisiana FAIR plan are worse off. Yet no question about their solvency. Will send messages to other carriers across the nation.  Rating agencies say you don’t have to have positive surplus.  [The everyone is doing it defense?]

12.16

Anne Vaughan, Port Aransas Chamber of Commerce [my apologies for any misspelled names]. Oppose what is “nothing more than an insane idea.” [Why is it insane to put an insolvent entity into receivership? Kubler-Ross stages of grief comes to mind. Denial. Anger] Has unconfirmed Commissioner of Insurance thought this through? TWIA is our only source of insurance. [But if it were not, one would never know if TWIA premiums were too low]

12.13

TWIA board member distinguishing between comments of TWIA and comments of TDI.

12.12

Joe McComb of Nueces County: Precinct 4.  The fun part of Nueces County. I do know people are concerned about coverage.  If they’ve got TWIA, they’ve shopped coverage and they have no alternative.  Worried that the decision has been made. [Yup]  Give legislature 60 days to solve this problem.  Good part of having a crisis is that the legislature is in session.  Place faith in elected officials. It will take 60-120 days to implement receivership anyway.  [Most persuasive speaker so far].

12.09

Keith McMullen with Port Aransas: Mayor of Port Aransas. Please don’t pursue receivership. Don’t case doubt on insurance market on the coast. Already created nervousness.

12.08

Schlitterbahn Waterpark representative speaks:  How will receivership impact existing contracts with lenders and vendors? TWIA receivership creates uncertainty that will chill business. [True, but what is the alternative if TWIA is insolvent? — SJC]. Before TWIA placed in receivership, other funding alternatives should be explored. [Like what? Assessments?]  My editorial comments are in brackets.

12.06

Jim Rich of Beaumont Chamber of Commerce: Very concerned about receivership. Notes importance of coast to economy. Wants a legislative solution. Let the legislative process work.  [But what if nothing happens? — SJC]

12.03

Public comment limited to 3 minutes with a timer. No more than 30 minutes to public comment period before moving to the rest of the agenda.

12.01

Calling roll

11.59

If you can see this it is a part of Rep. Deshotel’s letter.   It’s the first inkling of any legal theory behind the idea that TWIA can still asess for Ike.  Don’t expect insurers to buy it.geeslin assessment theory

11.55

Meeting is beginning.  One can see people milling on the video.

11.53

Channel 12 News (Beaumont) reports that State Representative Joe Deshotel has issued a press release opposing placement into receivership. Add him to the list of people whom I believe are mistaken on the law.  Here’s what he says in his letter:

If the Board would simply follow the law in place for these 2008 policies by assessing the insurance companies and moving the premium money to the Trust Fund, which currently has 8 million, TWIA would have over 5 million, which is hundreds of millions more (50%) than the Trust Fund has ever had!

11.50

Rick Spruill of the Corpus Christi Caller posted a preview of today’s meeting about 20 minutes ago.

11.46

In theory, you should also be able to follow this blog on Twitter using the hashtag #twia

11.40

Here some issues I expect to hear discussed at the meeting:

1) Is TWIA really as insolvent as its annual statement asserts (i.e. 3 million in the hole).  There are occasionally discretionary choices that get made in insurance accounting.  And there are occasionally mistakes.  Does anyone have a credible argument that TWIA is not seriously insolvent?

2) Assuming TWIA is insolvent, what, if anything, is the real alternative to a receivership?  When an entity is insolvent, as TWIA apparently is, that means some creditors can not be paid in full. If you fail to create an orderly process to pay claims, it means that the entity gets taken apart piecemeal and that different creditors are randomly (or systematically) treated worse than they should be. This is why we have insolvency law and (in most instances) bankruptcy law. Why should TWIA be treated differently?

3) Is there any authority as several coastal politicians have maintained to help TWIA out by assessing insurers for losses attributable to Hurricane Ike?  This blog has repeatedly maintained here, here and here that there is no such legal authority and that the old legal authority, section 2210.058 of the Insurance Code, was repealed in 2009.  Let’s see if there is anything more than denial or bluster behind the claim that TWIA can assess insurers without there being a new storm that would justify the issuance of public securities?

Texas Senate may take up S.B. 1700 today

Status

The Texas Senate via the internet

The Texas Senate via the internet

There are rumors that the Texas Senate may take up S.B. 1700 today. You can watch the Senate in action here. In the mean time, the Senate is also taking up another important issue, state retiree health insurance. If they get to S.B. 1700.  I will try to live blog, but no promises. You can also get Tweets from Rick Spruill of the Corpus Christi Caller at @Caller_Rick.

 

A minimalist last-minute fix for TWIA

It looks as if we are down to the wire in the Texas legislature on reforming the state’s public system for addressing catastrophic risk.  No one has developed a solution that is economically sensible and politically acceptable.  This leaves Texas in an extremely difficult position.  One alternative is to just leave the status quo in place. This choice subjects coastal residents to a substantial risk of a cataclysmic failure of their insurance system. Derivatively, it leaves the rest of Texas vulnerable to a Herculean task of picking up the huge financial pieces after a major tropical storm. The failure of the legislature to act also gives the Texas insurance commissioner extra cause to throw TWIA into receivership. The other alternative is to burden Texas for years with a very bad bill, S.B. 1700, which is the only proposal to emerge from a committee thus far. I thus offer a minimalist last-minute fix for TWIA.  Actually, I offer two.

This chart summarizes the situation today.

IssueAnswer
IssueAnswer
Days until the start of hurricane season1
Days until the end of the legislative session0
Next hearing of Senate Business and Commerce Committee None scheduled
Next hearing of House Insurance CommitteeNone scheduled
Size of Catastrophe Reserve Trust Fund$180 million
Bond Anticipation Notes (pre-event bonds)None. Approval refused by Commissioner Eleanor Kitzman
Reinsurance sought$1.15 billion at an attachment of $2.2 billion (not yet obtained)
Probability of TWIA losses in 2013 exceeding size of Catastrophe Reserve Trust Fund and Bond Anticipation NotesTWIA Estimate: 7.7% My Estimate: 10%-- could be higher if forecasts of active-hyperactive hurricane season prove accurate Estimates for 2013 and 2014 seasons are between 15-18% assuming no growth in Catastrophe Reserve Trust Fund
Bills enacted addressing TWIA problems for 2013 hurricane seasonNone
Bills enacted addressing TWIA problems for hurricane season past 2013S.B. 1702 (still requires signature of Governor Perry and does very little)

Texas must somehow get out of this trap between rotten choices. It should not permit exploitation of a largely self-created crisis by coastal legislators to hurt the rest of the Texas economy for years to come. Here is my suggestion.  It is not what I would want.  It is not a very good scheme.  But it is better than the status quo and it is better than SB 1700, which perpetuates morally unjust and sneaky wealth transfers, makes a mockery of commitments to the free market, and has, in the end and notwithstanding its innovative use of the word “must” in various provisions, no real plan to end the cycle of dependency on government mandated subsidies, often from poor to rich. My hope is that this suggestion can be politically acceptable if a lot of people suck up their pride and think about their constituents, both within their district and outside it.  In fact, I will offer two schemes. I am hardly expert on parliamentary procedure in Texas, but I am hopeful that both could be implemented through amendments to SB 1700. I am even hopeful that both schemes might conjure up the ⅔ vote necessary to get this bill in place in time for the 2013 hurricane season, which starts essentially as soon as the 83rd Texas Legislature recesses.

TWIA Fix 1: The absolute minimalist fix.

1. Fix the worst bugs in the system of post-event bonds in place.  Reduce the Class 1 Funding scheme to a $200 million maximum. Such a bond could probably be amortized by  only a 5% surcharge on TWIA policyholders after a major storm.  Those policyholders would grumble about being kicked when they were down, which would be true, but most could probably pay.  Their ability to pay provides the needed foundation for Class 1 Bonds to be marketable. Keep Class 2 Bonds in place and raise 70% of $1 billion from coastal insureds (including TWIA policyholders) via a premium surcharge and raise 30% of $1 billion from insurers.  If the Class 1 bonds fail, just start with Class 2.  Ditch the buggy and unworkable Class 2 Alternative Bond scheme in section 2210.6136. Keep Class 3 funding in place to raise an additional $500 million.  This will create something like a $2 billion stack for the 2013 and 2014 hurricane seasons. Maybe a little more for 2014 if we are lucky in 2013.

2. Require TWIA to put at least two dollars into its CRTF off the top for every dollar that it spends in reinsurance. That will make TWIA think carefully about the costs of purchasing reinsurance in a system where reinsurers charge about 5 times the expected risk and instead consider more carefully putting that money into the CRTF where there is close to dollar for dollar return.

3. Tell policyholders in the most forceful way about the risks posed to them by TWIA’s funding problem. Tell them with actual numbers derived from the best models available what the risk is that TWIA will not have enough money to pay claims and what the expected shortfall is likely to be.  If, for example, TWIA’s stack for 2013 is $2 billion, then advise policyholders that the risk of their insurer being insolvent is about 3-4% per year.  Tell them further that if TWIA becomes insolvent, they are most likely to get only 50 cents for each dollar that TWIA owes them. (My calculation). Finally, let them know that neither the state of Texas nor the Texas Property and Casualty Insurance Guaranty Association has any legal obligation to pay for losses not covered by TWIA. It reeks of Enron not to be as explicit as one can about the special risks TWIA policyholders face.

Warning : The Texas Windstorm Insurance Association is not expected \ to have adequate funds to pay claims in years where total losses \ exceed about $2 billion. There is about a 4% risk of this occurring \ in 2013. In such circumstances you may receive 50 cents or less for \ each legitimate dollar of claims you file. Neither the State of Texas \ nor the Texas Property Casualty Insurance Guaranty Association has \ any legal obligation to pay claims for which the Texas Windstorm \ Insurance Association lacks adequate funds.

TWIA warning label

Will this scare lenders? Only dumb ones that haven’t been following the situation.  It will, however, alert TWIA policyholders to the desirability of at least seeing if other insurance alternatives are available and, in any event, taking every possible precaution against loss if a storm approaches.

4. Eliminate this nonsense in SB 1700 of shielding the entities running TWIA from public scrutiny by giving them special exemption from disclosure laws.  If there were ever an entity affecting the public trust that ought to be subject to public information requests, which already have protection from undue burdens built in, it is TWIA.

TWIA Fix 2: A minimalist fix

1. Scrap the whole opaque layering scheme for post-event bonds.  It just disguises the foundation of wealth transfers on which the whole current scheme rests. If we are going to use post-event bonds to fund storm losses above the catastrophe reserve fund, have them paid for explicitly and transparently by insureds throughout the state. Pay for losses in excess of the TWIA CRTF  by permitting the Texas Department of Insurance to impose a premium surcharge on essentially all property/casualty insurance sold in Texas sufficient to amortize an aggregate $3 billion over 10 years.  The surcharge should be clearly labeled “to subsidize coastal property windstorm insurance” so that insureds throughout the state know exactly why they are paying this extra money.  Depending on interest rates, a $3 billion initial principal balance will require a payment of about $380 million per year, which I believe is on the order of a 1% premium surcharge for 10 years.  (Computation based on http://www.naic.org/state_report_cards/report_card_tx.pdf (page 6)). TWIA policyholders pay a double surcharge.

2. Start pre-funding this potential $3 billion obligation.  Create some sort of trust fund akin to the TWIA CRTF and fund it by imposing a 0.5% premium surcharge starting as soon as possible on the same set of Texas property/casualty insurance policies that would have to pay the surcharge described in paragraph 1. Again, the surcharge should be clearly labeled “to provide a reserve fund that subsidizes coastal property windstorm insurance.” That way, insureds throughout the state would know why their hard-earned dollars are being taken away.  Use these dollars to reduce initial principal balance on post-event bonds that will need to be issued (up to $3 billion) to pay for storm losses suffered by TWIA policyholders.

3. Again, tell policyholders in the most forceful way about the risks posed to them by TWIA’s funding problem. Tell them with actual numbers derived from the best models available what the risk is that TWIA will not have enough money to pay claims and what the expected shortfall is likely to be. If, for example, TWIA’s stack for 2013 is $3.2 billion, then advise policyholders that the risk of their insurer being insolvent is about 2% per year.  Tell them further that if TWIA becomes insolvent, they are most likely to get about 90 cents for each dollar that TWIA owes them. (My calculation). Finally, let them know that neither the state of Texas nor the Texas Property and Casualty Insurance Guaranty Association has any legal obligation to pay for losses not covered by TWIA.

4. Again, require TWIA to put at least two dollars into its CRTF off the top for every dollar that it spends in reinsurance. That will make TWIA think carefully about the costs of purchasing reinsurance in a system where reinsurers charge about 5 times the expected risk and instead put it into the CRTF where there is close to dollar for dollar return.

 5. Give inland interests more substantial representation on the TWIA board and give the TWIA board authorization to reduce its exposure (and therefore reduce the risk of insolvency) through a variety of steps, including placing a limit lower than currently exists on the maximum limit on residential properties (primary and secondary), imposition of higher deductibles or coinsurance than currently exists and ability to place different restrictions on policies on new properties than policies on existing properties. This will impel the TWIA board to do what it should have been doing all along — prioritize between affording higher and better coverage to people but running a substantial risk of insolvency, or providing more moderate coverage — perhaps with a focus on the less wealthy — for which money will actually exist in the event of a major storm.

Final Thoughts

I’ve been writing a lot over the past 10 months about ways of addressing the system of catastrophic risk insurance in place for the Texas coast.  It’s not so hard to be an academic theorist in which one can assume away the world of political constraints. But now, at the least, we have those realities to face and some scary deadlines coming up.  Maybe what I am proposing comes too late.  I hope not.  Because while my proposals are hardly perfect — indeed they should sunset by the 84th legislature — I do think each of them is considerably better than the horrible choice now facing the Texas legislature.  Maybe some future session will feature less inflammatory and unproductive bombast, fewer attempts at special interest legislation and more serious and informed reflection about ways in which mechanisms thought good enough for the rest of Texas and its insurance markets can again be made the primary method of catastrophic risk transfer along the Texas coast. In the mean time, you have my thoughts on what might currently be achieved.

 

S.B. 1700 placed on “Intent Calendar”

Note: this post has been edited on May 10, 2013, to reflect very helpful information I have received this morning.

According to Texas Legislature Online, S.B. 1700, a bill that would significantly alter funding and other aspects of the Texas Windstorm Insurance Association, has or will be placed on the “Intent Calendar” tomorrow, May 10, 2013.  So far as I can figure out, this placement is the predicate for a vote on the bill in the Texas Senate. This masterpiece of special interest legislation may thus be nearing approval (or rejection) by that part of our bicameral legislature in the next few days. To become law, however, it will need approval by the Texas House and signature by Governor Rick Perry.

The best explanation I have received of what this means comes from former Texas House member Patricia Gray, with whom I have had the pleasure of working for many years.  She writes:

In the Senate, there have to be 21 votes to bring a bill to the floor.  If it is on the intent calendar, Larry Taylor is counting to see if he has the 21–if he does, he can ask [Lieutenant Governor David] Dewhurst to call it up for floor debate.  From there it only needs a simple majority (16) to pass the Senate.  Time is getting very short — if he can’t move it in the Senate, it may  it may not make it.  I think tomorrow [May 10] is the last day for House bills to pass in the House, so unless there is a House vehicle to attach it to when House bills get to the Senate, it will not pass if he doesn’t have 21 votes to get it to the Senate floor.

Here are more official explanations.

Intent calendar

Senate rules require that bills and resolutions be listed on the regular order of business and be considered on second reading in the order in which committee reports on the measures are submitted to the senate. During a regular session, the senate adopts a further rule specifying that before a bill or joint resolution may be brought up for floor debate out of its regular order, notice of intent must be filed with the secretary of the senate by 3 p.m. on the last preceding calendar day the senate was in session. A senator may give notice on no more than three bills or resolutions before April 15 and on no more than five bills or resolutions on or after April 15. Senate rules direct the secretary of the senate to prepare a list of all legislation for which notice has been given. The list, called the Intent Calendar, must be made available to each senator and to the press not later than 6:30 p.m. on the day the notice is filed. No bill or resolution may be considered on its first day on the Intent Calendar, and a vote of two-thirds of the senators present is required before any of the measures listed on the Intent Calendar may be debated. The senate rules do not require measures to be brought up for consideration in the order listed on the Intent Calendar, and the senate routinely considers only a portion of those measures listed on the Intent Calendar for a given day. A senator must give notice from day to day for a measure that was not brought up for consideration to remain on the Intent Calendar. Any provision of the senate rule governing the Intent Calendar may be suspended by a vote of four-fifths of the members present.

 

http://www.tlc.state.tx.us/gtli/legproc/process_senagenda.html

 

Here’s another explanation:

Senate Action

Lacking a calendars committee, the Senate relies on the Intent Calendar which schedules bills for general consideration in the order in which they are reported favorably out of committee. However, the Senate does not follow this order. At the beginning of the legislative session, a dummy bill (not intended for floor action) is placed at the top of the Intent Calendar, making it necessary to take up all other bills outside of the regular order.

To do this the sponsor of the bill or a member of the reporting committee must get recognition from the President of the Senate (the Lieutenant Governor) to make a motion to take up a bill outside of the Intent Calendar order. Two-thirds of the members who choose to vote must approve such an action.

If the bill is taken up by the Senate, it is given its second reading, at which point it is opened for debate and amendment. As in the U.S. Senate, there is a tradition in the Texas Senate that permits members to speak for as long as they wish (or otherwise can physically sustain). When members try to kill a bill by “talking it to death” and using up so much time that the rest of the Senate agrees to move on, this is known as a filibuster.

If the bill is approved on the second reading, it is ready for its third reading and, ultimately, final approval. As in the House, amendments are allowed at this point and require a two-thirds majority vote of members present.

Although the Texas Constitution requires that a bill receive each of its three readings on three separate days, this rule can be suspended by a four-fifths vote of members present. Though the House rarely uses this motion, it is routinely used in the Senate to pass non-controversial legislation, particularly toward the end of a legislative session.

 

http://texaspolitics.laits.utexas.edu/2_8_3.html

TWIA validates risk of insolvency and threat of small weather events

A letter from TWIA in response to a public information request validates the methodology used on this blog to assess alternative legislative proposals to fund catastrophic risk in Texas. This response to a public information request also shows that, given TWIA’s thin capitalization and growing exposure, even small weather events can have a serious effect. A redacted copy of that response is provided in the link below. The redaction is to protect the identity of the requestor (not me) who fears retaliation for having submitted it.

[Copy of letter temporarily deleted until redaction can be improved]

May 8, 2013 letter from TWIA

May 8, 2013 letter from TWIA

Insolvency Risk

Here is TWIA’s risk of insolvency based on what it apparently believes it can achieve in pre-event funding, post-event bonding and reinsurance.  For reasons I have set forth elsewhere, I believe these estimates of how much funding TWIA can receive are financially and legally unrealistic.

Source of FundingAmountCumulative AmountProbability Exceedance
Source of FundingAmountCumulative AmountProbability Exceedance
Premiums and CRTF$200 million$200 million17.4%
Class 1 Bonds$500 million$700 million7.7%
Class 2 Bonds$1 billion$1.7 billion3.2%
Class 3 Bonds$500 million$2.2 billion2.5%
Reinsurance$1.15 billion$3.35 billion1.5%

Regular readers of this blog — actually an impressively growing number — will note two things.  First, these estimates are close to estimates I have made of the risk to TWIA.  I have not been crying “wolf” or (needlessly) imitating Chicken Little on this topic for these many months. There is a very serious problem on the coast of Texas and, derivatively, a very serious problem for the rest of Texas. Also, since my estimates of the burden on various constituencies posed by various legislative proposals are based on these same models (see here, here and here for examples), the TWIA data tends to validate my estimates.  Bills such as SB 1700 indeed force non-TWIA policyholders to pay a stunningly large portion of the claims of TWIA policyholders.

Second, these estimates are one year values.  If one looks at the risk of insolvency over longer period of time, the risk increases significantly.  So, for example, if TWIA is not substantially fixed until the 84th legislative session and its catastrophe reserve trust fund does not grow, there is about a 32% probability that TWIA will have to go beyond its catastrophe reserve fund in order to pay claims.

Reinsurance

TWIA confirms in its response that it is trying to obtain $1.15 billion in reinsurance. Its hope is to spend $106 million and get an attachment point atop Class 3 bonds of $2.2 billion. It confirms that it may be able to get between $900 million and $1.1 billion of insurance coverage for this money.

There is, however, a troubling paragraph in the public information request response. The one contingency mentioned in the response is that TWIA might not be possible to sell the Bond Anticipation Notes (BAN) and thus might need an attachment point on the reinsurance of $1.7 billion. Fair enough. But the problem is actually considerably more serious. If the BAN does not sell — indeed if any of the authorized $1 billion in Class 1 Securities can not fully be issued — then TWIA can not issue $1 billion in regular Class 2 Securities.  It has to issue what I have called Class 2 Alternative Securities.  But the Class 2 Securities depend on the same dubious funding source as the Class 1 Securities, so the market might not buy those either.  And, if the Class 2 Alternative Securities don’t sell the Class 3 Securities can not be sold.

TWIA actually noticed at least part of this problem back in December when it made its recommendations to the Texas legislature.  Read pp. 30-32 of this TWIA document. Six months later, however, TWIA appears to be ignoring that major problem even though the law under which it operates remains unchanged.   If TWIA and/or its reinsurance broker is not paying attention to this point, it could be about to make dubious use of $106 million in TWIA policyholder money.  Because if TWIA buys reinsurance with an attachment point of $1.7 billion or $2.2 billion and it has only, say, $900 million in actual cash available to pay claims, TWIA will have no money to pay losses between $900 million and the attachment point. There’s a gap. It’s like buying catastrophic health insurance with a big deductible when you don’t even have enough money to pay for modest claims. The reinsurance will not kick in and it will not “drop down.” And so, TWIA will be able to pay only a small fraction (perhaps as little as 50%) of its losses with unusable reinsurance just sitting there.

For what it’s worth,  I’ve talked about all this before (here and here, for example, and here too).  And its a bug that many of the proposals now floating about the legislature fix.  But who knows if any of these proposals will actually become law.

The CRTF

TWIA confirms that at the end of March it stood at $180 million. At least it has not gone down more since the beginning of the year.

Recent Hailstorms

A friend has stated that “TWIA doesn’t even have enough to pay for a thunderstorm.” I had always taken this to be an exaggeration.  But the Public Information Request confirms that a thunderstorm in Santa Fe and Hitchcock on April 2, 2013 — a localized non-catastrophic weather event —  generated about $50 million in losses (what would be 28% of its CRTF). Fortunately, this storm did not get beyond the budgeted amount for 2013 non-catastrophe losses and did not require a dip into the CRTF. But think about it.  This moderate weather event cost TWIA more than 10% of its premiums.  What if there’s another severe thunderstorm or two this year?  What does this say about premiums?  What does it say about the needed capitalization of a bulked up TWIA?

The problem is one of exposure.  TWIA now insures so much property and the coast — thanks partly to TWIA subsidized insurance rates — has become sufficiently developed  that even moderate or localized weather events can potentially wipe out TWIA’s Ike-depleted catastrophe reserve trust fund and force TWIA onto the uncharted waters of post-event financing.

Thanks

Maybe TWIA isn’t this helpful all the time to everybody, but in my experience TWIA has made an effort to provide timely and reasonable responses to reasonable public information requests.  So, a thanks to Jennifer Armstrong and the staff there on this point.

Caveats

It might be worth repeating that the views expressed on this blog are my own and do not necessarily reflect those of the University of Houston.

Also, the views expressed in this posts do not necessarily reflect those of the recipient of the public information request at issue.

S.B. 1700 in stark pictures

According to newspaper accounts here and here, S.B. 1700 is heading for a vote in the Texas Senate this week.  Before the Senate votes on the bill or the House Insurance Committee considers the matter, I hope they have some understanding of how radically it transfers wealth to TWIA/TRIP policyholders from people who do not have TWIA policies. I also hope legislators understand that although a $4 billion funding stack is definitely an improvement over the status quo, there is still a significant risk to the coast.  And I also hope they understand the TWIA/TRIP depopulation plan, which would in theory be a good idea, has about as much a chance of success without giant changes to TWIA and TRIP that will greatly anger coastal residents as a plan to depopulate Texas itself.

Here are some pictures that I hope aid understanding.

The Funding Stack

Here’s a picture of the TWIA funding stack for 2013 under S.B. 1700. For each element of the stack, I’ve shown who actually pays for that layer of responsibility.

SB 1700; Labeled[BarChart[{180, 500, 500, 500, 500, 1000, 800},    ChartLayout -> "Stacked",    ChartLabels ->     Placed[{"Catastrophe Reserve Trust Fund (TWIA premiums)",       "Class 1 Assessments (Texas insureds)",       "Class 1 Securities (Coastal insured surchanges)",       "Class 2 Assessments (Texas insureds)",       "Class 2 Securities (Coastal insured surcharges)",       "Baseline Reinsurance (TWIA premiums)",       "Insurer Purchased Reinsurance (Texas insureds)"}, Center],    BaseStyle -> {FontSize -> 11, FontFamily -> "Swiss",      LineIndent -> 0},    ChartStyle -> Map[Lighter@ColorData[61][#] &, Range[8]]],   Style["TWIA Funding Stack for 2013\n(Numbers in Millions)", \ {FontSize -> 11, FontFamily -> "Swiss", LineIndent -> 0}]]

TWIA Funding Stack for 2013 under SB 1700

Distribution of expected responsibility

Here’s a pie chart based on a 10,000 year storm simulation showing how much each layer of responsibility would expect to pay under S.B. 1700. There are several features of this graph worth noting.  First, note that TWIA policyholders have paid only for the modest dark red wedge at the left and the orange baseline reinsurance at the bottom left.  That is less than half of the expected payments.  (Yes, they pay a modest portion of the coastal insured surcharges too, but we don’t know how much).  Also notice the large cherry red wedge of unfunded losses.  Although the stack goes up to $4 billion or so under this bill for 2013, and although insolvency now occurs in perhaps 1.5% of the years (26% over 20 years), when insolvency occurs, it is a huge amount of money that is unfunded.

By Layer

SB1700; Framed@Labeled[PieChart[Mean /@ Through[funcs[rv]],    ChartLabels ->      Placed[Map[       Pane[#, 144] &, {"Catastrophe Reserve Trust Fund and operating \ funds (TWIA premiums)", "Class 1 Assessments (Texas insureds)",         "Class 1 Securities (Coastal insured surchanges)",         "Class 2 Assessments (Texas insureds)",         "Class 2 Securities (Coastal insured surcharges)",         "Baseline Reinsurance (TWIA premiums)",         "Insurer Purchased Reinsurance (Texas insureds)",         "Unfunded losses"}], "RadialCallout"],     ChartLegends ->      Placed[{"Catastrophe Reserve Trust Fund and operating funds (TWIA \ premiums)", "Class 1 Assessments (Texas insureds)",        "Class 1 Securities (Coastal insured surchanges)",        "Class 2 Assessments (Texas insureds)",        "Class 2 Securities (Coastal insured surcharges)",        "Baseline Reinsurance (TWIA premiums)",        "Insurer Purchased Reinsurance (Texas insureds)",        "Unfunded losses"}, Bottom],     ChartStyle -> Map[ColorData[61][#] &, Range[8]], ImageSize -> 580,     ImagePadding -> {{90, 100}, {20, 20}},     BaseStyle -> {FontSize -> 11, FontFamily -> "Swiss"}    ], Style[    "Distribution of expected loss payments by layer", {FontSize -> 14,      FontFamily -> "Swiss", FontWeight -> Bold}]   ]

Expected loss payments by layer based on 2013 stack

 By source

We can group the expected payments shown above so that we simply have expected payments by source.  Here is that graph.  Notice again that TWIA policyholders pay little more under this scheme than either Texas insurers (who will surely pass the cost on to non-coastal Texas insureds) and coastal insureds, many of whom have already paid for non-TWIA wind policies. And, again, notice the large chunk of unfunded losses that exists under S.B. 1700.

With[{wedges = With[{t = {#[[1]] + #[[6]], #[[2]] + #[[4]] + #[[7]], #[[3]] + \ #[[5]], #[[8]]} &[Mean /@ Through[funcs[rv]]]}, t/Total[t]]}, Framed@Labeled[ PieChart[wedges, ChartLabels -> Placed[Map[ Pane[#, 144] &, {"TWIA premiums", "Texas insurers (insureds)", "Coastal insureds", "Unfunded losses"}], "RadialCallout"], ChartStyle -> Map[ColorData[61][#] &, Range[4]], ImageSize -> 580, ImagePadding -> {{90, 100}, {20, 20}}, BaseStyle -> {FontSize -> 11, FontFamily -> "Swiss"} ], Style[ "Distribution of expected loss payments by layer responsibility", \ {FontSize -> 14, FontFamily -> "Swiss", FontWeight -> Bold}]] ]

Distribution of expected loss payments by layer responsibility under SB 1700

 By Cash Payments

There’s another way to look at S.B. 1700.  Don’t focus on the source of expected loss payments. Focus instead on source of expected cash flow.  The two are not the same because large chunks of cash flow get lost in TWIA/TRIP overhead and in paying reinsurers enormous amounts to bear risk (a subject discussed elsewhere). Here’s that pie chart.  Notice that TWIA policyholders now shoulder a considerably larger share of the load (about 2/3rds). There is still, however, a large chunk of the load picked up by Texas insurers/insureds (14%), coastal insureds (8%) and unfunded losses (9%).  The unfunded losses are a smaller chunk because the denominator for the pie chart is now larger.

SB 1700; Framed@Labeled[   With[{wedges =       With[{t = {#[[1]], #[[2]] + #[[4]] + #[[7]], #[[3]] + #[[5]], \ #[[8]]} &[ReplacePart[Mean /@ Through[funcs[rv]], 1 -> 460000000]]},        t/Total[t]]},     PieChart[wedges,      ChartLabels ->       Placed[Map[        Pane[#, 144] &, {"TWIA premiums", "Texas insurers (insureds)",          "Coastal insureds", "Unfunded losses"}], "RadialCallout"],      ChartStyle -> Map[ColorData[61][#] &, Range[4]], ImageSize -> 580,      ImagePadding -> {{110, 60}, {20, 20}},      BaseStyle -> {FontSize -> 11, FontFamily -> "Swiss"}]],    Style["Distribution of expected cash payments by source", {FontSize \ -> 14, FontFamily -> "Swiss", FontWeight -> Bold}]]

Distribution of expected cash payments for 2013 under SB 1700 by source

Political Power in TRIP

TRIP will be run by a Board of Directors appointed by the Texas Governor.  The graphic below shows the statutory composition of that board under new section 12 of S.B. 1700 (2210.102). Notice the little wedge representing non-seacoast interests.  Hopes, therefore, that the board will take steps to protect non-coastal Texans from having their wealth transfered to the coast would thus seem very optimistic.  Also notice how the southern areas of the Texas coast, which have less population and less insured property than the northern areas, have equal political power on the board.  This is not a one house (or one premium dollar) / one vote system.

Labeled[Framed@ Labeled[PieChart[{3, 1, 1, 1, 1, 1, 1}, ImageSize -> 200, ChartLegends -> Map[Pane[ Style[#, {FontSize -> 11, FontFamily -> "Swiss", LineIndent -> 0}], 216] &, {"insurance industry representatives who write \ wind/hail in first tier coastal counties", "Cameron-Kenedy-Kleberg-Willacy representative", "Aransas-Calhoun-Nueces-Refugio-San Patricio representative", "Brazoria-Chambers-Galveston-Jefferson-Matagorda-Harris \ representative", "non seacoast member", "engineer from second tier coastal county", "financial industry second tier coastal county"}], BaseStyle -> {FontSize -> 11, FontFamily -> "Swiss", LineIndent -> 0}], Map[Style[#, {FontSize -> 11, FontFamily -> "Swiss", LineIndent -> 0}] &, {"TRIP Board of Directors", "With ex-officio members: elected official from southern \ seacoast, elected official from northern seacost, elected official \ from non-seacoast"}], {Bottom, Top}], Style["Political Power in TRIP", {FontSize -> 11, FontFamily -> "Swiss", LineIndent -> 0, FontWeight -> Bold}], Top]

Board of Director membership in TRIP

The Depopulation of TWIA/TRIP

One of the concepts in SB 1700 is that TWIA/TRIP should be “depopulated” by reducing its total insured exposure (currently over $75 billion).  Great. The bill does not, however, come with a magic wand with which to accomplish this task. The only tool it provides is a club that threatens the insurance industry with a collective $200 million assessment that goes into an “exposure reduction plan fund” if the 2016 target of a 20% reduction from 2013 levels is not met.  It places insurers in a bit of a prisoners dilemma and creates a lot of litigation-fomenting administrative discretion on this point by saying that the assessment will only be levied against insurers that “as determined by the [TRIP] board of directors, has not met the member’s proportionate responsiiblity for reduction of the association’s total insureds exposure.” So, if all other insurers have started selling insurance — presumably at a major loss — on the coast using TWIA or sub-TWIA rates, the insurer who is left and refusing to sell insurance on the coast might find themselves with a very hefty bill even if they just have a modest share of the Texas property-casualty market.  And this, I take it, is the whole point behind the clever section 2210.212 of the bill.

I suspect, however, that the $200 million assessment will be unlikely to lure many insurers back to the coast.  There is going to be a first mover problem.  If very few large insurers choose to avoid the 2210.212 club by selling on the coast, then no insurer ends up paying a very large 2210.212 assessment. Question for any other lawyers (or law students) reading this entry: would it violate federal antitrust laws, as modified by the McCarran Ferguson Act, for insurers collusively to refuse to sell; would it violate Texas law?

The other point — and this is the one to which the picture below relates — is that the reduction targets are ambitious.  Although they are stated as reductions from the 2013 status quo, they will in fact be larger.  That’s because TWIA/TRIP is likely to continue growing at significant rates.  Thus, to make a 20% cut from the 2013 status quo, one needs to make perhaps a 30% cut from the 2016 expected status quo. The graph below illustrates this point by comparing 3% TWIA growth to the depopulation targets stated in section 2210.212.

 

Labeled[Show[ DateListPlot[{{"January 1, 2013", 1}, {"January 1, 2016", 1.03^3}, {"January 1, 2018", 1.03^5}, {"January 1, 2020", 1.03^7}, {"January 1, 2022", 1.03^9}, {"January 1,2024", 1.03^11}}, PlotRange -> {0, 1.4}, PlotMarkers -> Automatic, PlotStyle -> Green, FrameLabel -> {"Time", "Total Insured Exposure As Fraction of 2013"}, BaseStyle -> {FontSize -> 11, FontFamily -> "Swiss"}, Epilog -> {Arrow[{{3.6238320000000005*^9, 0.28615669133896926}, {3.6578745686249995*^9, 0.7181793832820529}}], Inset[TextCell["Assessment of $200\nmillion if not reached", GeneratedCell -> False, CellAutoOverwrite -> False, CellBaseline -> Baseline, TextAlignment -> Left], {3.588546672*^9, 0.19378500614472127}, {Left, Baseline}, Alignment -> {Left, Top}]}], DateListPlot[{{"January 1, 2013", 1}, {"January 1, 2016", 0.8}, {"January 1, 2018", 0.65}, {"January 1, 2020", 0.55}, {"January 1, 2022", 0.45}, {"January 1,2024", 0.4}}, PlotMarkers -> Automatic, PlotStyle -> Red]], Style["Natural Growth of TWIA/TRIP (green) compared to 2210.212 \ \"requirements\" (red)", {FontSize -> 11, FontFamily -> "Swiss"}] ]

Natural growth of TWIA/TRIP compared to 2210.212 requirements

My final picture is of Albus Dumbledore and the most powerful wand in the universe: the Elder Wand.  I show it because, I suspect, that is what it is going to take for TRIP to actually accomplish the targets set forth in the legislation without infuriating the very political constituencies that have, with SB 1700, again kicked the fundamental problems of catastrophic risk transfer down the road.

The Elder Wand

Perhaps the only thing that will actually be able to implement the SB 1700 targets without infuriating coastal Texans

TRIP could raise premiums drastically to market rates.  That would likely reduce total insured exposure, but somehow I don’t think that is the idea in the legislation. It could refuse to take on new customers. Imagine the squeals that will produce. It could do what I have suggested for years and refuse to insure beyond some basic amount and rely on market-provided excess insurance for the rest. To do so to the extent of the targets contained in SB 1700 will likely require that excess policies kick in at about $100,000.  Again, I have doubts that his what the proponents of this legislation have in mind. Or, finally, TRIP could just realize that its impossible to reduce total insured exposure without taking steps that are going to be extremely unpopular with the very constituencies that put forth this bill. They could, instead, giggle. They could recognize that the “must” language in the bill is basically a legislative joke — a pretext for extracting in disguise another $200 million out of Texas insureds throughout the state to subsidize, yet again, coastal property, owned by poor and wealthy alike.

Breaking News: Major TWIA Bill Approved by Senate Committee

According to a reliable source, a highly amended S.B. 1700 that resembles somewhat the committee substitute HB 3622 has been voted favorably out of the Senate Business and Commerce Committee.

Here’s a link to the bill. Senate Bill 1700 approved by Business and Commerce

I’ll try to provide a detailed analysis in the next 24 hours.  The short version, however, is this bill looks like a masterpiece of special interest legislation that current TWIA policyholders on the coast should love. It gets rid of the worst problems in post-event bonds that have been around since 2011. Everyone off and on the coast should be glad that this problem is eliminated. The SB 1700 voted out of committee favorably reduces the probability of a storm that would gravely injure TWIA policyholders and, derivatively, the rest of Texas. It requires little if any sacrifice from TWIA policyholders in terms of mitigation and asks rich and poor insureds throughout Texas to subsidize property along the coast even more so than before. That subsidization continues even if the owners of coastal property are wealthy and don’t need or deserve the subsidy. But it continues extracting this money in a way that is very hard for the average insured to understand or see.  If you live off the coast, your 3% higher insurance bill won’t have a picture showing you the lovely beach home or modest coastal property you are now subsidizing more than before with your hard earned money, but you’ll be doing it nonetheless.

Also, the bill (section 2210.212) says that TWIA “must” reduce its potential exposure quite substantially both over the next few years and over the next decade.  In theory this means that TWIA will have to drop policyholders and private insurers will have to pick them up. It looks, however, as if all that “must” means is that Texas insurers, if they don’t write insurance on the coast as desired by TWIA, will have to collectively fork over $200 million.  I have serious doubts this provision means much more than that Texas insurers can look forward to passing on a $200 million bill to their non-coastal policyholders every several years — how, exactly, is Allstate supposed to compete with subsidized TWIA? —  but perhaps if Allstate (just to pick on one large insurer arbitrarily) were to sell in the least vulnerable parts of the coast, it might be able to do so at only a modest loss and avoid being hit by the stick that this bill gives TWIA.  Anyway, more on this and other interesting bill features soon.

Oh, and I almost forgot.  If this bill passes it won’t be TWIA anymore.  It will be TRIP, the Texas Residual Insurance Plan.