The Texas Windstorm Insurance Association (TWIA) reported a significant worsening in the adequacy of its current rates this year, according to an analysis released ahead of a board of directors vote on a rate filing.
The association found residential rates are inadequate by 38%, up 18% from a year earlier. Commercial rate inadequacy more than doubled, increasing to 45% from 22%.
According to a report by AM Best, TWIA attributed the situation to an increase in policies, the need for greater reinsurance, and economic inflation raising construction labor and material costs.
In a breakdown of rate elements, TWIA noted that reinsurance, one of three fixed expense categories, rose 20.5% this year to 44% for residential coverage and increased 24% to 50.4% for commercial coverage.
TWIA set $6.5 billion as its statutory target for 2024 storm season coverage, establishing it as its 1:100 probable maximum loss for the season. This funding level is $2 billion more than TWIA secured in 2023. The agency added more than 25,000 policies over the previous year, and the total insured value of covered properties rose by 26.4%.
Operating expenses decreased 2.3% to 5.2%, and there is currently no outstanding debt, TWIA said in the rate adequacy analysis. Variable expenses are 0.1% lower, and provisions for non-hurricane and hurricane losses declined.
Over nearly two decades, the annual analysis has routinely indicated inadequacy rates of 26% or greater for residential and 21% or greater for commercial. However, rates were unchanged in seven years since 2008, with a 5% increase in most other years.
State law requires TWIA to post a rate adequacy analysis at least 14 days before its board of directors votes on a rate filing.
TWIA is mandated to make a rate filing with the Texas Department of Insurance by August 15 annually. Public comment on an upcoming rate filing will be taken at an Actuarial & Underwriting committee meeting on July 15 and at TWIA’s board meeting on Aug. 6, when it will decide the filing.
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