One way not to promote sanity

An opinion column in the Corpus Christi Caller by Nick Jiminez uses the issue of whether Insurance Commissioner should be an elected position in Texas as a vehicle for repeating bogus arguments about hurricane insurance in Texas.  Now, I don’t really have a stance on how that position should be filled — we seem to vote for an awful lot of offices here in Texas — but I do know that the points addressed in support of Mr. Jiminez’s position don’t make much sense. And I do believe that repetition of bogus arguments and this form of “messaging” is not a constructive way of addressing the serious problems facing the Texas coast.

I will list several of Mr. Jiminez’s arguments in turn and attempt to debunk them.

1. The Insurance Commissioner is unaccountable as evidenced by her inability to answer a question posed by State Rep. Todd Hunter at a hearing last month.  The question was how much the 14 coastal counties contribute to the Texas economy.  The correct answer was apparently 30% according to a study. But the question asked does not have a single “correct” answer.  To be sure, the coastal counties contribute immensely to the Texas economy, but there is not a single number that reflects this point. Moreover, I am willing to wager with Mr. Jiminez that if one were to have used the methodology employed by this study to come up with the 30% number, one would have found that the area around Dallas contributes a large percent, and similarly the area around Houston, and Austin and the Panhandle, etc. such that the total “contribution” would add up to well over 100%.  The problem, I suspect, is not with Commissioner Kitzman (or the other officials stumped by Rep. Hunter at the hearing) but with a question, that unless made far more precise, is objectionable.  Moreover, even if this Insurance Commissioner fumbled on this occasion and didn’t seek clarification of an ambiguous question posed by a good lawyer, this is hardly an argument for changing the political system.  Do you think that many of our elected officials would be able to respond on the spot to similar vague “statistical” questions?  I don’t.  Do you think that Commissioner Kitzman is unaware of the large contribution made by the coast to the Texas economy?  I don’t think so either.

Note.  I don’t begrudge Rep. Hunter making a thinly disguised argument in a legislative hearing.  I do begrudge those who would use the failure to answer an objectionable question “correctly” as a good reason to change our political system or to criticize the incumbent.

2.  Tropical cyclone insurance rates should be lower in Corpus Christi because it has not had a hurricane in 40 years.  This argument is wrong in so many ways.  First, hurricane risk is not tropical cyclone risk.  The area with 60 miles or Corpus Christi has been hit or brushed by tropical cyclones 34 times in the 140 years since records have been kept.  It gets hit by hurricanes on average once every 15 years.  TWIA and other cyclone insurers pay for high winds and named storms, not just hurricanes. As anyone who remembers Allison can say with confidence, tropical storms can be incredibly expensive events.  You can’t just ignore them. Second, the fact that Corpus Christi has been fortunate in recent years is little more likely to predict future performance well than the fact that the Astros had won four in a row on May 25, 2012, and were almost at .500.   Although it may be legitimate to claim that Corpus Christi appears to be less at risk for hurricanes than other parts of the Texas coast, it is not legitimate to cherry pick time periods and measure risk on that basis.

3. “If South Texas were a person buying car insurance, we would be getting a price break, not a huge bill as we are now.”  I won’t dispute that the bill is large, but the real issue is whether the bill is large relative to the risk.  If it were, Mr. Jiminez must explain why it is that private insurers are not beating down the door to write windstorm insurance in Nueces County.  Some vast conspiracy to not make money?  Moreover, if coastal politicians truly bought this argument, they must explain why they oppose TWIA basing its rates on geography rather than the essentially uniform rates that currently exist.

4. “Electing a commissioner would allow the poor and low-income voters, who often can’t afford steep windstorm rates, to have a say in who sets insurance rates.”  This point has some merit, but I have serious doubts it would help the Texas coast.  A lot of the poor and low-income voters about whom Mr. Jiminez appears concerned do not live on the coast.  They are currently subsidizing coastal residents — many of whom have houses far more valuable than theirs and owned by people who are considerably more wealthy — by letting  rich and poor on the coast alike purchase coverage at rates that do not reflect actuarial reality.  And the more expensive the house, the greater that subsidy. It is those poor about whom Mr. Jiminez claims concern who will end up paying parts of the assessments and surcharges to pay for claims suffered by rich and poor TWIA policyholders.  So, I’m not so sure the poor of El Paso and Dallas and, yes, Amarillo, will be eager in an election to vote for the candidate who pledges to continue the sort of subsidies for the coast that now exist.

All of that might explain why, in the end, Mr. Jiminez kills his own straw man  — is there a serious push to make the position elective?  He concedes that “[t]he real focus of an effort to bring some sanity to coastal insurance rates ought to be the next Texas Legislature, not fighting to get the insurance commissioner on the ballot.”  On this point, I probably agree, although I guess I wonder why one would then embark on a long rhetorical journey so hostile to the current Commissioner.  But sanity will not be made more likely by use of coastal newspapers to advance arguments that, no matter how frequently repeated, just do not hold water.

The curious case of Corpus Christi

Today’s Corpus Christi Caller has an interesting article that purports to show a special immunity of the Corpus Christi area to hurricane risk, which is said to be no more than that facing New York City. The article is based on a report from NOAA published since 2010 and apparently brought to the recent attention of Todd Hunter, Corpus Christi’s state representative. It’s based on data from 1887 forwards that attempts to calibrate the comparative risk of landfall both within Texas and throughout the Gulf and Eastern Seaboard.

Here’s the key picture which, though not shown in the report, appears to underlie the article’s conclusions and quotations.

Return periods of Atlantic hurricanes

Return periods of Atlantic hurricanes by county

See the blue 19 next to Corpus Christi and the blue 20 next to New York City. This is supposed to show that the risk of hurricanes in those two regions are similar: one every 19 or 20 years a hurricane will strike within 50 miles. And see the orange 9s next to Galveston and Brazoria counties. That is supposed to show that the risk of hurricanes in those two regions are greater, once every 9 years.

The evidence gets a bit more complicated, however, if one looks at the next picture in the NOAA document, one not mentioned in the Caller article. It shows the history of major hurricanes based on historic evidence from 1887 to 2010. Although the coastal bend (33-40 years) still comes out better than the east Texas coast (25-26 years), the ratio isn’t as great as for all hurricanes. Moreover, the comparison with New York City now fails. The Big Apple gets hit only once every 68 years.

Major hurricane return periods

Return period for major Atlantic hurricanes by county

So, what are we to make of all this? I would say not too much. What the NOAA report lacks is any notion of statistical significance that would make it particularly useful in drawing fine grained distinctions between areas of the Texas coast. It might just be that what the pictures show is significantly good and bad luck. Drawn from a sample of just 130 years or so, one might expect to see distributions of return periods that varied from county to county. Perhaps some trends might be observable, such as greater strike frequency in Florida than Texas, but what the report lacks is a “p-value,” the probability that one would see variations in the data as large as those exhibited in the graphics simply as a matter of chance. I’m not faulting NOAA for this; it would be very hard to develop such a statistic and it was purporting to capture historic evidence only. Moreover, our climate is dynamic. Storm tracks and storm frequency can change as a result of global weather phenomenon. Thus, while one should not ignore historic data, you have to be very careful about projecting it into the future or using it to make highly specific projections.

So, should the report be ignored? No. Perhaps curious atmospheric features (jet stream placement) and geographic features such as the placement of Cuba indeed give Corpus Christi a little shield. And if Corpus Christi wants to argue on that basis for lower rates for southwest coastal Texas and higher rates for the eastern Texas coast, I wouldn’t be mightily opposed. Somehow, however, I don’t think that’s where coastal Texas wants to go in the upcoming legislative session. Recognition of large differences based on geography in catastrophe risk isn’t the best basis on which to plead risk socialization and rate uniformity. (More on that point soon!)