I’ll have a fuller post later and the meeting is still in progress (in closed session), but here are the headlines thus far.
1. A TWIA board member (Alice Gannon, I believe) acknowledges that if TWIA does not get new Texas Insurance Commissioner Julia Rathgeber to reverse a decision of her predecessor refusing to authorize $500 million in borrowings via a Bond Anticipation Note, TWIA will not have money to pay claims promptly in the event of even a modest storm. I do not have an exact quote, but at minute 46 of the hearing she says something to the effect of “Without the BAN, it is highly likely we would not be able to pay claims in timely fashion.” Other board commentary indicates it will take 3 to 6 months to sell post-event bonds, assuming they could be sold at all. TWIA will be meeting with Commissioner Rathgeber this Friday (June 21, 2013) to try to persuade her to reverse former Commissioner Eleanor Kitzman’s decision.
2. TWIA has acquired $1 billion in reinsurance with an attachment point of $1.7 billion. It has the right until July 15 to increase its reinsurance to $1.25 billion but increase its attachment point of $2.2 billion.
3. As feared, TWIA’s financial condition is already having an effect. Premium finance companies are refusing to lend more than $16,000 to pay TWIA premiums. Lenders don’t want to try to bring claims for unearned premiums against an insolvent insurer.
4. TWIA actually has only $340 million in cash after having paid much of the recent $135 million Ike settlement. It believes it will have $400 million in cash by August and through the end of the year.
5. TWIA will ask the Texas Department of Insurance to permit it to change accounting practices so that it can count the Catastrophe Reserve Trust Fund on its books as its assets. Doing so would move TWIA from being seen as having a negative surplus to perhaps having a positive surplus.
6. TWIA will not cancel over 2,000 policies that it has knowingly issued in violation of provisions of the Texas Insurance Code governing compliance with building codes. Instead, starting in January, after this year’s hurricane season it will decline to renew such policies as they come up for renewal. This refusal to enforce the law was the subject of sharp criticism yesterday from State Senator Larry Taylor and may give rise to claims by those assessed to pay for post-event bonds that TWIA’s exposure was unlawfully increased.
7. TWIA did not vote to consent to imposition of a receivership.
8. TWIA will not try to assess insurers based on a law that was repealed in 2009. It acknowledges that that there are “uncertainties” as to whether it has authority to do so and that actually collecting such assessments would be difficult.