Texas insurer of last resort offers coverage to failed Weston clients

Florida's property insurance crisis is being felt as far away as Texas, where about 30,000 property owners were left without insurance at the height of hurricane season.

Those property owners were covered by Weston Property & Casualty Insurance Co., a Florida insurer placed into liquidation by a Florida court on Aug. 8. All Weston policies will end on Sept. 7.

Enter the Texas Windstorm Insurance Association, a state-created insurer of last resort. TWIA stepped in to offer immediate coverage to property owners who cannot find coverage elsewhere, even before they pay any premiums. The TWIA board held a public meeting Wednesday to discuss the unusual emergency.

"It is the peak of hurricane season," noted Jessica Crass, vice president of underwriting with TWIA. "And with these receivership and liquidation proceedings, we know there is a lot of uncertainty around the timing of when folks will receive their unearned premium refund."

Of the 30,000 policyholders, about 23,000 are located within the TWIA "designated catastrophe area," Crass said, which runs along the Gulf of Mexico coastline south of Houston. The remaining 7,000 are located further inland. Approximately 21,000 policyholders are for wind and hail only, she added.

TWIA began meeting daily with the Texas Department of Insurance on Aug. 16, Crass said, to work through issues and provide coverage as soon as possible.

"What was determined was we could initiate a new payment plan ... that requires no premium upfront," Crass explained. "The zero down payment plan, or the Weston receivership payment plan, was, in fact, launched last night and it is currently available in the agent portal. So agents can select that. Of course, it is only available to those Weston policyholders impacted by this cancellation."

Some of those new TWIA policyholders from Weston might not make payments for 90 days, Crass noted. TWIA issued 12,343 new policies in August, with 2.119 of them listing Weston as their previous carrier, she added.

Premium concerns

Some TWIA board members had concerns about providing policy coverage on those good faith terms. Theoretically, an ex-Weston policyholder could take out a TWIA policy, pay nothing for 90 days, then drop coverage, board members pointed out. They might even lodge a claim during that time.

"Right now our process would be to handle the claim and to follow our normal process there and issuing any payments as necessary," Crass said, "and then pursuing payments separately."

There would be a 15-day period, following the 90 days, before a policy would be cancelled. All commissions to insurance agents would be paid on a regular schedule.

"They'll have coverage from September to Dec. 15 even though you haven't collected any premium," said Michael Gerik, TWIA board member. "I assume you'll cancel it on the 15th [of December]. You're not going to cancel it back flat to [Sept. 7]. That's the only way there would be no coverage. So I think we're on the coverage and we'll try to collect the premium."

Weston, which also operates in Mississippi and Louisiana, is the 10th property and casualty company placed into receivership in Florida since 2017 and the sixth since Jan. 1, 2021.

The dissolution follows a two-year effort by Weston to come into compliance with the Florida Office of Insurance Regulation’s financial stability requirements.

In December 2021, the company notified the office that it would not meet its minimum surplus requirements and secured approval to restructure its reinsurance program and cancel about 520 wind-only policies.

But in spring, despite a corporate restructuring and capital infusions totaling $47.9 million, the company reported a net loss of $57.7 million for 2021.

Rising policy numbers

Florida lawmakers convened a special legislative session in May to combat the homeowners insurance crisis.

New legislation steered $2 billion of taxpayer money into a fund to help insurers pay hurricane damage claims, limit lawsuits against companies and have homeowners shoulder more of the cost for roof replacements. However, problems remain, experts say.

Fallout from the crisis includes Florida residents flocking to Citizens Property Insurance Corp., that state's insurer of last resort. Citizens recently topped one million policies, which threatens its viability.

Correction: The title for Jessica Crass was incorrect in an earlier version of this article. She is vice president of underwriting at TWIA.

InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected]. Follow him on Twitter @INNJohnH.

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InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected]. Follow him on Twitter @INNJohnH.