No simple solution for rising premiums

Texas homeowners' insurance rates are rising fast, and there is little the Texas Legislature or anyone else can do to slow them down.

Average premiums for Texans have jumped 43% since 2023 and will rise about $500 this year, according to Insurify, an insurance comparison shopping website. That's only the beginning.

Insurance giant Swiss Re Group estimates natural disasters will cause $145 billion in global insured losses in 2025, up from $137 billion last year. The United States accounts for nearly 80% of global insured losses, with Texas, Florida, Louisiana, California and Colorado accounting for half.

The United States faces a 1 in 10 chance of experiencing $300 billion in insured losses this year, with a major hurricane hitting Galveston as one of the worst-case scenarios.

Hailstorms, hurricanes, floods and fires cause enormous damage in Texas, and climate change is making them more costly every year. When losses go up, so must premiums.

"Exposure to varying degrees of catastrophe risks explains most of the divergence in premiums," Swiss Re researchers wrote. "States with the highest exposures to natural perils, according to insurance loss history, are also where, in general, homeowner premiums are highest."

Texas insurance companies covered $41 billion in homeowners' losses between 2018 and 2023, according to the latest data from the Texas Coalition for Affordable Insurance Solutions, an industry lobbying group.

The companies collected $58 billion in premiums, but with 33% going to overhead and administrative costs, insurers lost money over those years. Raising premiums is the only way companies can keep offering policies, the industry says.

Democrats in the Texas House want the industry to show their work.

State Rep. Trey Martinez Fischer, D-San Antonio, filed House Bill 5519 to require insurers to submit supporting documents to justify premium increases greater than 5%. The Texas Department of Insurance would have to approve such an increase before it could take effect.

Republican state Sen. Charles Schwertner's Senate Bill 1643 would require TDI to review hikes of 10% or more. Both bills are pending in the House Insurance Committee.

Elsewhere, Republicans are tweaking around the edges, trying to keep rates on Texas' most vulnerable properties low and shifting risk to the rest of us.

The House passed HB 3869 on Wednesday, by state Rep. Todd Hunter, R-Corpus Christi, to change how catastrophic losses are paid by the Texas Windstorm Insurance Association. TWIA provides insurance to homes along the coast that private companies won't touch.

Instead of TWIA paying for $1 billion in excess hurricane losses by issuing government bonds and TWIA policyholders paying it back, the state would pay for the losses and then recoup the money with interest through surcharges on all homeowners' premiums statewide. People living inland would subsidize coastal residents' insurance.

House Bill 1576 tries to reduce those losses with a grant program to fortify single-family homes at risk of hurricanes. State Rep. Tom Oliverson, R-Cypress, believes it is cheaper to bolster defenses now rather than replace homes later. Insurance companies offer lower rates on properties that meet hurricane resilience standards.

Lastly, state Rep. Jeff Barry has House Bill 2517 that will exempt TWIA and the Texas Fair Plan Association, the insurer of last resort for the rest of the state, from paying state premium and maintenance taxes. The plans will save TWIA policyholders about $14 million annually, but shift that tax burden onto the rest of us.

These three bills have a chance of becoming law, but they will not lower premiums. Insurance spreads catastrophic risk across the state, so we all pay higher premiums when disaster strikes. Unless you don't buy insurance.

About 1 in 7 American homes do not have insurance. The nation's highest uninsured rates are in the border towns of McAllen, with 43.3% of homes uninsured, and El Paso, with 23% uninsured, according to LendingTree, a financial advice firm. Taxpayers often cover their losses.

Reconstruction is also more expensive due to higher labor costs, while inflation and tariffs drive up the price of building materials.

The true culprit of the insurance crisis, though, is human-induced climate change, even if Republican leaders refuse to acknowledge it. The warmer the atmosphere, the more extreme the weather, the higher the premiums. Some parts of Texas may become unviable.

"The economic value of entire regions--coastal, arid, wildfire-prone--will begin to vanish from financial ledgers," Günther Thallinger, who serves on the board of Allianz, a global insurer, explained in a report. "Markets will reprice, rapidly and brutally. This is what a climate-driven market failure looks like."

Award-winning opinion writer Chris Tomlinson writes commentary about money, politics and life in Texas. Sign up for his "Tomlinson's Take" newsletter at houstonchronicle.com/tomlinsonnewsletter or expressnews.com/tomlinsonnewsletter.