Breaking News: TWIA likely to go into rehabilitation

The Texas Department of Insurance has released a FAQ setting forth what will happen in the event that TWIA is placed into rehabilitation.  Insurance regulators don’t — and shouldn’t — issue unsettling documents like this unless the threat is very real and very imminent.  I’m attaching a plain text version of the document to the end of this post (after the break). I’ve done a tiny bit of formatting to accommodate the blog format.  You can see the original version in PDF format here. Things are moving very fast.  I’ll have some comments on what is going on, but for now I just wanted to apprise interested people of this important development.

Key quotes from the FAQ

  • The Annual Statement shows that, based on additional litigation filed in 2012, TWIA is now insolvent. TWIA’s liabilities exceed its assets by $183 million. Allowing TWIA to continue to operate in this condition could place new policyholders in jeopardy, and could further threaten the current policyholders.
  • “If TWIA’s funds are insufficient to pay all existing claims, it may be necessary for the Rehabilitator to make partial payments on a pro rata basis.”
  • “The hold on claims payments would not apply to losses stemming from storms occurring after TWIA was placed in Rehabilitation.”
  • “TWIA does not currently have any outstanding pre-event public securities.”
  • 18. Would Rehabilitation affect the availability of mortgages in areas covered by TWIA? Rehabilitation would not change TWIA’s ability to issue new policies, renew policies, or fulfill its obligations under current policies. [Note that the question is not actually answered — SJC]

 

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Craig Eiland: TWIA can still assess for Ike

According to ABC-13, State Representative Craig Eiland of Galveston also thinks I’m wrong about whether TWIA can still assess insurers for damages caused by Hurricane Ike in 2008.  I’ve stated here and here in this blog that the repeal of section 2210.058 of the Texas Insurance Code in 2009 certainly seems to have ended that authority.  But Rep. Eiland states: “The board can reassess the companies now — today, tomorrow, next week — for the money and premiums they paid out in claims since Hurricane Ike.” TV stations don’t usually include footnotes, so I’m genuinely curious about what Rep. Eiland’s legal authority is for his assertion.

I’m also curious to see what would happen if TWIA followed Representative Eiland’s assertion and actually tried to reassess insurers around the state to pay for persistent Ike claims.  My guess is that it would not provide cash in time for the 2013 hurricane season. I suspect that many Texas insurers would file a lawsuit before they wrote a check.