Over the past week, two draft plans have emerged to restructure the Texas Windstorm Insurance Agency. The first plan, a copy of which may be found here, comes from a collaboration between David Crump, a citizen with a long time interest in windstorm reform, and Dave Norman, a recent candidate for the Texas State Senate. The second plan, a copy of which may be found here, comes from Port Aransas attorney Charles Zahn, and a group called the Coastal Task Force. I’ll be examining each of these plans in the days ahead but a theme of both is to reduce the now-serious risk that TWIA policyholders will go unpaid in the event of a serious storm.
At first glance the Zahn Coastal Windstorm Plan appears to place more emphasis on subsidization of risk by non-TWIA policyholders along the coast and insurers throughout Texas (and, derivatively, their insureds). The Zahn plan also makes the state of Texas ultimately responsible for losses in excess of what TWIA can pay. So, Texas taxpayers will be subsidizing coastal risk in the event of a giant storm and Texas insureds of all sorts located far from the coast will be paying to build up a catastrophe reserve fund even if no storm occurs and helping to pay TWIA policyholders in the event a significant storm occurs. But the Zahn plan also tries to reduce the growth in TWIA exposure through hardening the coast. It calls for new residential construction to meet the WPI-8 standard and grants or credits for hardening existing structures.It also seeks to extend the protections of HB3 (which currently protects just TWIA) to all wind policies on the coast — an idea for which I may take some credit.
The Crump-Norman plan appears to place more emphasis on reducing TWIA’s exposure through benefit limitations and risk reduction by increasingly premiums significantly on buildings that do not comply with certain building codes. It does not appear to place Texas taxpayers directly on the hook in the event of a giant storm. Both plans attempt to avoid the costly reinsurance that is currently helping to gut TWIA. My guess is that there will be more plans to come.