Take a look at the National Flood Insurance Program and the havoc Category 1 Sandy wreaked on its finances. While there are differences between NFIP and TWIA, fundamentally the issue is government subsidized insurance encouraging inefficient development in catastrophe prone areas and then, precisely because of inadequate premiums, having inadequate assets to pay off policyholders. Here are some worthwhile articles: Property Casualty 360, Washington Post editorial, Insurance Journal, Wired. And a fun YouTube video: best line “We don’t have special car insurance for Lindsay Lohan.”
Amazing how easy it is to see in hindsight precisely the sort of problems we are warning about here.