Why do coastal politicians urge low TWIA rates?

The title of this blog entry may seem a particularly dumb question. Coastal legislators, the simple answer proceeds, want the Texas Windstorm Insurance Association to keep rates low because it helps their constituents’ pocketbooks. But is that really true? Or, more precisely, under what circumstances would that be true?

The first thing to recognize is that low premiums have a somewhat different effect when they go to Allstate than when they go to TWIA. One can quite understand policyholders not wanting to pay Allstate very much money because its profits simply go for the benefit of Allstate’s shareholders. TWIA, on the other hand, has no shareholders. To the extent TWIA collects “too much” in premiums, that is extra money available to pay future claims of future coastal policyholders. Over collection by TWIA favors future coastal residents in a way that over collection by Allstate does not.

One can get at a better answer to this question by asking why TWIA insists that policyholders pay much or, indeed, anything in advance premiums at all. Since the risk of tropical cyclones is difficult to quantify, why not just have a post-disaster assessment scheme? It would work as follows: when we know how large the damages are from some hurricane relative to TWIA cash on hand (which might be zero if there were no premiums), TWIA simply “post-assesses” its policyholders to pay in that much money over some period of time. We wouldn’t need no stinkin’ models; we’d just see what happens. Take imaginary Hurricane Barry that creates claims (plus lost adjustment expenses) of $1 billion above any cash TWIA happens to have on hand. Because TWIA has about $70+ billion of property under its control, if TWIA could spread the payback period over 5 years, some back of the envelope math suggests that the consequence of this scheme would be that someone with $200,000 worth of coverage would have to pay roughly $571 per year to take care of the claims caused by Barry.

This proposed post-assessment alternative sounds pretty good. I bet many TWIA policyholders with $200,000 properties would be delighted to pay only $571 per year for tropical cyclone coverage.

Unfortunately, the proposed alternative won’t work as inexpensively as described. This baseline figure of $571 is a significant underestimate. There are two reasons: interest expenses and post-assessment shrinkage.

The interest issue is easy to understand. Few policyholders with demolished properties want to wait 5 years living in a tent or in a home decorated with blue tarp until all the assessments are collected before getting their claims paid. So, to pay for Barry, TWIA has to borrow the $1 billion. But now TWIA policyholders don’t have to just pay back $1 billion, they have to pay it back with interest. Interest expenses alone can raise the annual payback amount substantially.

There’s also a shrinkage problem. Once the price of being a TWIA policyholder jumps due to the assessment, TWIA will no longer be assessing the amount of property it did prior to the storm. Thus, to continue with our example, to compute the necessary assessment, TWIA won’t be dividing the amount of damages by the $70+ billion; the denominator will be smaller. And this means that the assessment, because it will be spread over less property, will have to be larger. But the larger assessment means that yet more people will drop out of TWIA, which means that the assessment will have to be yet larger. One can’t easily say whether and if this spiral will stop, but one can be confident that the size of the assessment will increase significantly due to both the interests costs on the loan and due to the reduced size of the TWIA pool.

Footnote here. There is another way to run an assessment scheme: don’t assess future policies; assess policies in place at the time the disaster struck. Such a method avoids shrinkage as I’ve described it, but it creates another problem: collection. Instead of just cancelling policies that don’t pay assessment, TWIA now has to actually track down over a period of many years former policyholders some of whom just will not have the money to pay what is due. That’s expensive and will not yield a 100% recovery rate. And, as I read the Texas statute, it’s not what’s contemplated in the event of a large storm. Anyway, whether done by assessments on future or in-place policies, post-assessment has problems.

I don’t think it’s unreasonable to believe that for something like Hurricane Barry, interest and shrinkage would raise the post-assessment by about 25% over its baseline cost. But no one knows this number with any certainty. And this means that there is a substantial risk that the scheme won’t work or, that conservative lenders, will worry that it won’t work and will accordingly charge very high interest rates. Indeed, TWIA appears to have discovered that, although the Texas statute will let it borrow $1 billion following a disaster to be repaid with policyholder assessments, the market appears willing only to lend $500,000. So, post-assessment schemes are risky.

There’s an additional problem, however. And, this one is a killer. I just provided an example with a $1 billion Hurricane Barry. If we start increasing the size of the storm to, say $2 billion (over cash on hand) hypothetical Hurricane Tanya (or we add another smaller hurricane in the year such as $1 billion hypothetical Chantal), the shrinkage problem starts to grow. Indeed, with a more serious storm such as Tanya (or Barry + Chantal), there is a significant risk of a death spiral in which there are not enough TWIA policyholders left to repay the assessment.

What this means is that a sensible insurance scheme has to balance at least two factors: you don’t want insureds paying too much because — well — that’s money out of the hands of insureds and doing so could needlessly depress the coastal economy. On the other hand, you don’t want insureds paying too little because that creates the risk of a storm large enough to plunge any assessment scheme into a death spiral.

So, what an intelligent discussion of this issue needs to do is to discuss a balance of these two problems with actuarial and climate science in mind. By focusing only on the over-collection issue, certain coastal legislators are sadly distorting and deterring an intelligent political debate. The consequence of this distortion could be quite serious for coastal residents. They may find that the assessment scheme they counted on to help TWIA pay for losses just does not work. They will then need to come begging to the state or Uncle Sam for a bailout. Indeed, that is precisely what the latest actuarial study engaged by TWIA/TDI predicts will occur a substantial percentage of the time if coastal premiums are not raised substantially.

Now, what I could imagine a coastal politician saying in response to this blog (I do hope they read it — and read it all the way to the exciting end), is that the post-assessment problem is overstated because the Texas statute limits the size of assessments that can be made. Moreover, they might say, TWIA does not depend exclusively on policyholder assessments to pay for tropical cyclones that cause damages in excess of cash on hand. And, to some extent, this rebuttal is true. But, if we break it down, what the politicians are really saying then is that small premiums aren’t a problem because they expect someone else to pick up the pieces if a big storm hits. That is, TWIA policyholders aren’t to be treated like ordinary policyholders who are in serious difficulty if their insurer (predictably) goes insolvent after charging too low premiums; TWIA policyholders stand in a privileged position relative to other Texans.

I have a lot of problems with this rebuttal. First, there is still a problem because, as I have pointed out at some length, the other sources (limited assessments on non-TWIA coastal policies; limited assessment on Texas insurers) will not yield enough cash to pay fully for losses incurred after serious storms in the densely populated parts of the Texas coast. Even the coastal politicians now appear to recognize this fact but poo-poo what they believe is a 1.5% annual risk of this occurring. But even if there were zero risk of a TWIA default, the rebuttal rests on the dubious premise that coastal residents are entitled to some special privilege that the rest of Texas does not enjoy.

And, here, we get to the core of the issue. After you put all the smokescreen rhetoric aside, what certain coastal politicians are really saying is that the coast is indeed special. But why? Yes, many find the coast lovely, but so too do many find the Texas Hill Country or even the stark beauty of the northern panhandle with its silos, vistas and hints of ancient vulcanism. Yet neither Kerrville nor Dumas insureds have the benefit of getting full insurance on their $200,000 property while paying the premiums sufficient to cover only a policy with a $50,000 limit. If the preference for the coast is based on aesthetics, then let us be explicit and subsidize coastal beauty. Yes, the coast contributes to the Texas economy. But so does Houston, so does Dallas, so does El Paso, so does Stephenville and so does Dalhart and Childress and Texarkana. Dollars are dollars. Should Galveston residents assume the risks posed by locating property in Dallas because Dallas contributes greatly to all of us here in Texas?

So, in my opinion, the “coast contributes” justification is completely bogus.

Are coastal residents disproportionately afflicted by some imperfection in the insurance market from which the rest of Texas is exempt? Might that justify the privilege? I see no evidence of any special, irrational animus towards the Texas coast on the part of the insurance industry. Greedy insurers would as much enjoy profiting from coastal consumers as they do profiting from those in Stephenville. Why, if they could do so at a rate they thought profitable, would insurers collectively sit back and let a government entity take over the coastal insurance business? The fact that many (and not all) companies won’t write on the coast is more easily explained by the low prices of its publicly subsidized competitor — TWIA — or by feared regulatory price constraints than by some vast conspiracy. The most likely reason prices are high on the coast is because risks there are particularly uncertain and particularly correlated and because stockpiling the requisite cash to pay for large claims is expensive.

Now, is it the “fault” of a Galveston policyholder that they live in a place subject to uncertain, correlated risk? No. There is no moral failing. Is it a “choice?” That depends. For some, such as the owner of a second home, quite probably. Moreover, even for a first home, people choose to have a million dollar home rather than a $500,000 home. For others, however, less so. The current scheme in Texas, however, treats TWIA insureds as special regardless of the degree to which their ownership of property is a choice. In general, it’s a good idea for insurance prices to reflect risk accurately because that, in the long run, encourages intelligent investment decisions. Societies that subsidize risky activities for long periods of time end up with more risky activities and become, as the pandering of some coastal politician suggests, addicted to them at great expense to the rest of society.

The better rebuttal — and the one I actually hope starts to gain prominence — is that giving TWIA lots of money has enabled it to waste money purchasing incredibly expensive reinsurance in a market whose competitiveness is open to question. Because reinsurance has cost TWIA something like six times the actuarial value of the risk it assumes, policyholders would do better, this argument proceeds, for TWIA to charge less in premiums or to charge the same in premiums, pray for a few good years, and to stockpile the extra funds. This argument, by the way, has some support in the recent report of TWIA’s actuarial consultants. But, if wasting money on reinsurance is the issue, the better solution is to restrict TWIA’s discretion in using its funds for this purpose. TWIA could, after all, buy reinsurance even if premiums were reduced. Now, how exactly to intelligently restrict TWIA’s discretion in reinsurance purchasing is the subject for another day. In the mean time, however, the purported advocates of coastal policyholders had best be very careful lest their concerted advocacy in support of what they wish for, lower premiums, succeeds and a large insurer has insufficient resources to pay claim as a result. Pity the coastal politician seeking another term after they deprived the insurer of residents in their districts the resources that insurer needed to pay claims fully.

Quick blog entry on the TWIA meeting of August 6, 2012

I managed to watch most of the TWIA board meeting this morning. Thanks to TWIA for providing this additional form of access to its proceedings. I’m just going to do a quick bullet point list here of matters I found interesting. I’ll try to return to each of these in the days ahead.

1. TWIA has shifted its reinsurance strategy. Instead of a reinsurance attachment point that lay between Class 2 and Class 3 securities, TWIA has now put reinsurance at the top of the stack. It’s also managed to purchase more reinsurance by doing so, notwithstanding a “hardening” of the reinsurance market. This means more protection for policyholders in the densely populated counties but it also means that Texas insurers writing in Lubbock, Dallas, and other non-coastal areas plus non-TWIA policyholders on the coast will bear more of the burden of a large storm by having to repay bonds.

2. One issue TWIA better think long and hard about now that it has placed reinsurance at the top of the stack is how it is going to collect that reinsurance. Traditionally, reinsurers require the insurer to pay the claims first and then to seek reimbursement. But, before this reinsurance will kick in, TWIA will have exhausted its statutory borrowing capabilities of Class 1, 2 and 3 securities. So, does that mean TWIA will have to wait years collecting premiums hopefully in excess of receipts before it can actually get the reinsurance money? How much would it cost TWIA to negotiate a waiver of the indemnity nature of the arrangement? If it’s not a lot, I’d pay!

3. There was talk about how, with $800 million in cash available (source?), TWIA would have months before it would need to raise money from Class 2 and Class 3 securities. I know I’m the gloomy sort, but I have concerns about whether (a) $800 million is enough cash-on-hand for a major storm and (b) whether a few months will be sufficient to raise the extra funding.

4. Uh oh. I learned today that TWIA doesn’t think it can actually raise the $1 billion in Class 1 securities it is authorized to issue following a significant storm. It may only be able to raise half of that. Why? Well, they didn’t say but I assume it is because the market is leery of the ability of TWIA policyholders to actually pay back that money via future increases to their policies. Some TWIA policyholders will likely drop out (or have had their insurable property eliminated). On the one hand, I will confess to deriving some satisfaction from having been proven right that the $1 billion in Class 1 securities was very iffy money On the other hand, it is kind of horrifying to discover that TWIA’s ability to raise money is even more limited that previously asserted.

5. TWIA is evidently going to consider whether to ask the legislature to reduce the maximum policy limit from about $1.8 million for a residential structure down to a lower number. Some board members noted that there was private insurance coverage available for such risks and that other government coastal insurers were not so generous. Representative Craig Eiland from Galveston objected saying that such exposures constituted a small part of the TWIA portfolio and that no one would build large homes on the coast if they couldn’t get TWIA insurance. I’ve advocated in the past that, so long as TWIA policyholders are being subsidized by the rest of the state, that subsidy should not extend to very expensive properties, particularly if private excess insurance is available.

6. TWIA has formed a 10-12 member legislative committee chaired by Mike O’Malley to make recommendations to TWIA regarding recommendations TWIA should make to the Texas legislature on reform. The committee will apparently focus — as it should — on finance issues. Two items of note: only six of the committee members will be TWIA board members. One of the members will be a private advocacy group, the Coastal Coalition. I’m not sure why this advocacy group, which I believe is now renamed the “Don’t Kill The Texas Coast” group gets a privileged position. There was also a discussion of voting rights on the committee. I’m not sure this was resolved, but it strikes me as bizarre that TWIA would delegate voting authority to people not charged with the responsibilities of board members.

P.S. Just fixed a typo in paragraph. It said “not” but it mean “now.” Big difference. Sorry.

TWIA meeting happening now; you can watch it in action

9:03 am Central time August 7, 2012. Just go to TWIA.org and click on the right side where it says “click here to watch the broadcast.” Here’s the agenda for the meeting.

Interesting points from the meeting thus far. TWIA apparently does not a complete “contingency plan” in place yet to deal with how to make partial payments to policyholders when it does not have enough cash on hand. That’s a little scary. TWIA is not sure how it is going to collect on its reinsurance given that reinsurance operates on an “indemnity basis,” meaning that TWIA has to pay out first and then get reimbursed from the reinsurer. An interesting and difficult issue. Where is TWIA getting the money from in order to get reimbursed? Could TWIA negotiate a waiver of the “indemnity aspect” of the reinsurance contract? Did it try?

To fix the TWIA mess, focus on the fundamentals

This op-ed is reprinted from the Houston Chronicle

To fix TWIA mess, focus on the fundamentals
By Seth J. Chandler
Updated 06:52 p.m., Friday, July 27, 2012

Texas has been spared a major tropical storm so far this hurricane season, but that doesn’t diminish the fact that the state is woefully unprepared to deal with potential losses. If a significant fraction of possible Category 4 or Category 5 hurricanes were to strike, the Texas Windstorm Insurance Association (TWIA) would not be able to fully pay claims in Harris, Galveston, Brazoria and possibly other Texas counties. Since 2009, neither the state of Texas nor insurers in Texas are legally responsible to make up the shortfall. In 2013, let’s hope the Legislature stops rearranging deck chairs on the Titanic and explores more fundamental reform.

It’s not just a major hurricane problem or a Galveston problem. Right now, TWIA will not be able to pay with cash on hand or reinsurance funds many claims throughout Texas – not just the most densely populated counties – in the event of a serious storm. Instead, TWIA will be forced to borrow a limited sum, possibly at high rates, to pay the claims. The state will then have to impose significant surcharges on various forms of insurance over a number of years to pay the loans back. Running insurance in reverse and forcing policyholders to pay higher premiums just when they have been hit with losses is seldom a recipe for economic stability.

Unfortunately, as many coastal states are learning, there is no easy solution to this problem. Even those who like the free market must admit past difficulties in providing complete insurance along the coast for windstorm at rates that homeowners and businesses find tolerable. Special and explicit government subsidization of more complete windstorm insurance for the coast has its own financial costs, political problems and moral shortcomings. And the underinsurance engineered into the current law, coupled with some disguised subsidization, leaves Texas insureds at serious risk, particularly in the more densely developed areas of our coast.

The problem is tough because insurance works best where risks are known and uncorrelated. The fact that A has a fender bender with his car in Galveston County provides no information as to the likelihood that neighbor B will have an accident with her car at the same time. So auto insurance works well. Uncorrelated risk means that insurers do not have to stockpile a lot of liquid capital in order to pay expected claims. Something known in mathematics as the law of large numbers makes it unlikely that the amount of revenue an automobile insurer takes in won’t be enough to pay claims.

Windstorm risk along the Texas coast, by contrast, involves correlated risk with uncertain magnitudes. The fact that A’s house in Galveston is blown down by a hurricane informs greatly the likelihood that neighbor B’s house will be similarly destroyed. When insured risks are correlated, insurers and reinsurers have to stockpile lots of safe, liquid assets in order to pay claims in timely fashion. And keeping assets under the mattress hurts insurers and reinsurers in providing a decent return to their shareholders.

There are fundamental ways of addressing high magnitude, correlated risk that can be more successful. One solution is to reduce the magnitude of correlated risks. There is an awful lot of research showing that we can lessen the damage hurricanes cause through hardening: very tough building codes and other infrastructure improvements. A hardened site in Galveston, after all, is currently considered safe enough to house the smallpox virus. Burying power lines allows people to return to their homes sooner, which reduces the losses from a storm. Limiting publicly subsidized insurance plans to lower levels of coverage and requiring individuals to obtain private insurance for the excess also reduces the magnitude of correlated risk held by government plans. Lessening the economic consequences of hurricanes could attract private insurers back to the Texas coast, make state schemes less expensive, and make people feel more secure. The biggest bang for the buck will come from hardening the densely populated counties.

A second approach is to try to decorrelate the risks. Texas could pool its windstorm risk with California’s earthquake risk, Washington state’s volcano risk or windstorm risk from another region. Alternatively, Texas could pool its risk in, say, 2013 together with its risks in 2014 and 2015 by requiring coastal residents who purchase insurance from TWIA to commit to three-year contracts. There are many challenges with each of these plans, but given the absolute magnitude of the issue, even modest gains are worth exploring.

And the third approach is, frankly, to develop a greater tolerance for the high rates that come with insuring correlated risk. Hardening the coast and looking for opportunities to pool our catastrophe risks with uncorrelated catastrophes will help. But Texans on our coast need to let it sink in that they are holding property that is unavoidably expensive to insure and budget for the higher premiums that result. And their legislators who deny this reality do their constituents no service by leaving them catastrophically underinsured.

Chandler is Foundation Professor of Law at the University of Houston Law Center, former co-director of its Health Law and Policy Institute and director of its Program on Law and Computation.

It’s a Weibull

To understand the premiums charged by the Texas Windstorm Insurance Association and the current legal and financial issues being debated in Austin, you have to get your hands a little dirty with the actuarial science.  You need to have some ability to model the damages likely to be caused by a tropical cyclone on the Texas coast.  Now, to do this really well, it might be thought you need an awful lot of very fine data.  In fact, however, you can do a pretty good job of understanding TWIA’s perspective by just reverse engineering publicly available information.

What I want to show is that the perceived annual exposure to the Texas Windstorm Association can be really well modeled by something known in statistics as a Weibull Distribution. To be fancy, it’s a zero-censored three parameter Weibull Distribution: 

CensoredDistribution[{0, ∞},
 WeibullDistribution[0.418001, 1.26765*10^8, -4.81157*10^8]]

We can plot the results of this distribution against the predictions made by TWIA’ s two consultants: AIR and RMS. The x-axis of the graph are the annual losses to TWIA.  The y-axis of the graph is the probability that the losses will be less than or equal to the corresponding amount on the x-axis. As one can see, it is almost a perfect fit.  For statisticians, the “adjusted R Squared” value is 0.995. 

Image

 

How did I find this function? Part of it is some intuition and some expertise about loss functions.  But a lot of it comes from running a “non-linear regression” on data in the public domain.  Here’s a chart (an “exceedance table”) provided by reinsurance broker Guy Carpenter to TWIA.  It shows the estimates of two consultants, AIR and RMS, about the losses likely to be suffered by TWIA.  Basically, you can use statistics software (I used Mathematica) to run a non-linear regression on this data and assume the underlying model is a censored Weibull distribution of some sort.  And, in less than a second, out pop the parameters to the Weibull distribution that best fit the data. As shown above it fits the AIR and RMS data points really well.  Moreover, it calculates the “AAL” (the mean annual loss to TWIA) pretty well too.

 

Image

In some forthcoming posts, I’ m going to show what the importance of this finding is, but suffice it to say, it explains a lot about the current controversy and suggests some matters to be examined with care.

The Op Ed on TWIA run by the Austin American Statesman

This op ed was run by the Austin American Statesman on July 10.  I am reprinting it here.

Leaving denser coastal counties out to dry if major windstorms strike

Seth J.Chandler, Special Contributor

Published: 7:11 p.m. Tuesday, July 10, 2012

 

The biggest windstorm in Texas so far this summer has been generated not by the warm waters of the tropics but by the courage of Texas Insurance Commissioner Eleanor Kitzman.

In June, Kitzman responded to a request from state Rep. John Smithee, R-Amarillo, by stating that the Texas Windstorm Insurance Association would be unable to pay claims fully if some Category 4 or higher hurricanes hit.

The state-created operation provides insurance against tropical storms and hurricanes on $72 billion worth of property owned by 259,000 people living on the Texas coast.

Kitzman further said the law did not require the State of Texas to rescue either an insolvent TWIA or Texas homeowners and businesses left with incompletely paid claims.

For this statement, Kitzman has been vilified by some coastal media outlets and by some coastal politicians, culminating in a call this week by state Rep. J.M. Lozano, R-Kingsville, for Texas Attorney General Greg Abbott to investigate her for breaking Texas law.

What was Kitzman’s possible crime? Lozano says her letter may have made a “misleading representation regarding the financial condition of an insurer” or somehow violated a state pledge not to impair collection of assessments on bonds that TWIA might issue following a major hurricane.

Kitzman’s real crime was daring to tell the truth to people who do not want to be confronted, now that hurricane season has started again, with the consequences of an irresponsible decision. In summer 2009, the Texas Legislature, to much praise, did fix a flaw in the old system of insulating Texas coastal residents from the cruelties of the private insurance market.

The Legislature saved Texas insurers, even ones not writing insurance near the coast, from the potential of unlimited assessments to pay for a major hurricane. But in doing so, it deliberately chose to reject a competing plan that would have forced TWIA to use actuarially sound rates and that took modern science on global warming into account.

The state Legislature instead used two sleights of hand in 2009 to make the tough medicine go down.The first was to keep current premiums lower by running insurance in reverse. Rather than forcing TWIA to collect enough premiums now to have cash on hand in the event of a major hurricane, the legislators chose to rely on “post-event bonding” vehicles called Class 1, 2 and 3 Securities.

Texas insurers will raise premiums and not just on windstorm insurance and not just on the coast after a hurricane, when people would already be hurting, to pay for these classes of securities that it assumes it will be able to sell following a major storm.

Texas’ second trick was to choose not to insure fully against the costliest hurricanes, such as a Category 4 or 5 hitting Galveston County. As TWIA itself puts the matter, “currently, there is no funding for TWIA losses in excess of Class 3 public securities” or about $3.6 billion.

The Texas Legislature saved money the same way you could if you insured your $8,000 or your $32,000 car for a maximum of $8,000 loss with the thought that fender-benders are frequent, but really catastrophic events seldom happen.

Such a system would indeed lower your premiums, and it might fully protect the less expensive car. And, if all went well, such a policy might even protect the more expensive car. But it still places your expensive car at risk.

Whether consciously or not, in 2009 the less-propertied Texas coastal counties, such as Kleberg and San Patricio, from which Lozano hails, hornswoggled the rest of the state into accepting a system that probably can pay even their major claims fully (like totaling the $8,000 car) but left the more propertied coastal counties, Galveston and Brazoria, at risk for major claims or totals.

So, if we’re shooting messenger, Kitzman, for telling Texas the truth about its underfunded public windstorm insurance system or, possibly worse, for promoting its restructuring, shoot me, too.

I declare again, as a law professor who has studied TWIA’s statutes and its finances for many years: The Texas Windstorm Insurance Association does not have the financial capacity to pay claims fully in the event a major hurricane strikes a property-rich Texas county and neither the state nor anyone else is under any current legal obligation to make up the difference.

Perhaps you should shoot me first because, unburdened by whatever political constraints may keep Commissioner Kitzman more polite, I further declare that the coastal counties, having deliberately chosen to underinsure and reap the benefits of lower premiums, have no moral claims on Texas, either.

Chandler is Foundation Professor of Law at the University of Houston Law Center and director of its Program on Law and Computation; schandler@uh.edu.

Why I blog on Texas Windstorms

I am blogging because Texas, and other coastal states, have set themselves up for disaster by engineering flimsy legal and financial regimes to address the risks of tropical cyclones.  I read accounts in the press or on the Internet that are based on incredible misinformation and wishful thinking that nature will not respect. I see many politicians in a cycle of untruths with their constituents that leave coastal residents and businesses at significant risk of a catastrophe. Selfishly, I know that I, a semi-coastal resident, will be asked, one way or another to help pick up the pieces in an expensive way if a major storm hits a densely populated part of the Texas Coast.

I am also blogging because, immodestly, I have considerable expertise in this area and can’t just submit every thought to the Houston Chronicle and hope that they publish it. As a law professor at the University of Houston Law Center with a deep interest in actuarial science and finance, I’ve studied the legal and financial operations of the Texas Windstorm Insurance Association for many years.

Finally, I guess I am blogging because I want to give some courage to people who want to look at the Texas insurance scene with an open mind.  I have seen one Texas political figure, Insurance Commissioner Eleanor Kitzman, vilified by many coastal politicians and residents for daring to tell the truth about the risks now being run.  That is just wrong.   We say we want politicians to tell us the truth.  But do we really?  So, my hope is to give useful information and analysis to people who dare to look without prejudice at Texas windstorm situation. 

I’ll be using several tools to present information.  WordPress supports text and pictures and all the usual stuff.  I’ll  use those modes of expression to the best of my ability. But it also supports interactive tools (CDF technology) that let you, the reader, really explore the situation and make up your own mind.  And, ultimately, I suspect that is how we will all learn best.

So, enjoy, read and think.