Houston Chronicle Loren Steffy column [Houston Chronicle]

Oct. 25--Here's how I would fix the financial quagmire that is the Texas Windstorm Insurance Association:

[Material redacted.]

It's not actually my idea. I borrowed it from the Texas Department of Insurance and the Texas Attorney General's office.

Those two state agencies have teamed up to obfuscate discussions within the insurance commission about restructuring the troubled finances of the state's windstorm insurer of last resort. Some solutions apparently being considered could raise property insurance rates substantially for coastal residents or even result in higher premiums for policyholders statewide -- from the Piney Woods to the Panhandle.

We don't know for sure because Insurance Commissioner Eleanor Kitzman isn't saying what measures should be considered.

It's no secret that the windstorm pool's finances aren't sustainable. Its rates can't support the cost of the risk it shoulders underwriting about 60 percent of the windstorm policies along the coast.

If something doesn't change, the windstorm pool may have to tap some form of public financing, which ultimately could leave taxpayers on the hook.

This week, the insurance commission released an email about the windstorm pool that Kitzman sent to staffers in July, saying she wanted to discuss "options for funding a 3-5 year transition to market rates." She added: "Some thoughts include using the...."

The rest is redacted.

The email turned up in an open records request made earlier this year by the Austin American-Statesman. Using a frequent foot-dragging technique now widely invoked by state agencies, the insurance commission asked Attorney General Greg Abbott for an opinion on whether its documents had to be released.

Abbott said -- surprise, surprise -- the goings-on of a state agency is the public's business but allowed the commission to redact the end of Kitzman's email.

"It's important that we know what the commissioner is thinking," said Alex Winslow, executive director of Texas Watch, an Austin-based consumer group that focuses on insurance. "Why doesn't she want to tell us?"

Jerry Hagins, an insurance commission spokesman who provided me a copy of the redacted email, said Kitzman wasn't recommending a particular option for restructuring.

"The email was from her to some actuarial staff to look at some rate data," he said. "Because it mentioned market rates, it got some people concerned."

That's because "market rates" can be interpreted different ways. It could mean Kitzman wanted to discuss raising windstorm policy rates. One recent study found that to stabilize the windstorm pool, rates would need to jump as much as 45 percent.

But "market rates" also could imply forcing private insurers to write wind policies along the coast. Many have pulled out of the area because of high claims costs, which is why we have an insurer of last resort in the first place. If they're forced to re-enter the market, they may spread costs across policyholders statewide.

"TWIA's a mess," Winslow said. "What do we do about it? We need to discuss it out in the open."

Hagins said the email controversy is moot because the commission hired a consulting firm, Alvarez & Marsal Insurance Advisory Services, to present options for restructuring the pool. Those findings, sent to the Legislature in September, trump any issues raised by the email, Hagins said.

The Legislature, not the commission, ultimately is responsible for restructuring the insurance pool and its rates.

Kitzman may not have been making a recommendation, but the public has a right to know what options the commission is considering or what options her staff has abandoned. Consultants may provide suggestions, but they shouldn't be speaking on behalf of the state's regulator.

The commissioner's insights matter. They shouldn't be whispered in secret, and when they are, the state's top cop shouldn't be helping to cover them up.

Loren Steffy, loren.steffy@chron.com, is the Chronicle's business columnist. His commentary appears Sundays, Wednesdays and Fridays. Follow him at blog.chron.com/lorensteffy, www.facebook.com/LorenSteffypage and twitter.com/lsteffy.

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