Windstorm Insurance Bill Passes Texas House

May 26--After a heated debate late Sunday night, the Texas House approved a bill to change the funding scheme for the quasi-governmental insurer of last resort for businesses and residents in coastal Texas.

Senate Bill 900 -- authored by state Sen. Larry Taylor, R-Friendswood, and sponsored in the House by state Rep. Greg Bonnen, R-Galveston -- passed 80-47. The bill seeks to put the troubled Texas Windstorm Insurance Association, or TWIA, into stronger position to pay wind and hail claims after a coastal catastrophe.

"It further strengthens and stabilizes our ability to have windstorm insurance," said Bonnen, adding that it's important for the whole state to have a strong coastal economy.

The bill is supposed to ensure that TWIA has the money needed for a one-in-100 year storm in any given year.

But state Rep. John Smithee, an Amarillo Republican and former chairman of the House Insurance Committee, said the measure is flawed. It would end up forcing non-coastal property owners to subsidize coastal owners' insurance policies, he said.

"This is a $1 billion tax bill on insurance companies," Smithee said. The insurers won't ultimately pay the bill, he said, because they will pass it on to policyholders.

The average homeowner's policy would jump $150 a year if the proposal becomes law, Smithee said.

Bonnen disputed Smithee's figures and said that non-coastal Texans "will never see any significant impact, in my opinion."

The debate turned contentious as members from coastal counties fought Smithee, who tried numerous times to amend the bill. Smithee was largely unsuccessful with his amendments, which included attempting to prevent legislators from making money selling TWIA policies and setting commissions for agents selling TWIA policies at the average rate.

By law, all authorized property insurers in Texas are required to be members of TWIA. And the bill says that if TWIA's reserves and cash on hand are depleted, then those companies could have to pay up to $200 million more in annual assessments above their obligations under current law -- giving them the potential to be collectively assessed as much as $1 billion.

The bill would also change the composition of TWIA's board of directors, giving coastal Texans a louder voice. It also would require TWIA to conduct a study to improve market incentives.

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