The Texas insurance industry could find itself in a cash crunch if a storm like Hurricane Charley hit the coast, and insurers could be forced to pass on the costs to homeowners across the state, industry officials said.
The officials said the Texas Windstorm Insurance Association, the state backstop created to take on the riskiest properties along the coast, is woefully underfunded and may not be able to absorb a large catastrophe on its own.
The association was created by lawmakers in 1971 to provide wind and hail coverage after Hurricane Celia struck the Texas coast. It has 100,000 policies in the state’s 14 coastal counties and part of eastern Harris County, with $23 billion in exposure.
If a Category 4 storm struck Galveston, for example, the association could be liable for about $2.5 billion in losses, according to the association’s projections. But it only has the capacity to cover $1.3 billion before it would have to turn to the private sector with unlimited assessments.
“We need to make some changes. We’re sitting down with lawmakers to present some thoughts,” Jim Oliver, the association’s executive director, said in Tuesday’s edition of the Houston Chronicle. “We’re working with some insurers as well to come up with ideas.”
Some of the suggestions include raising rates for policyholders, exempting the association from federal taxes and creating a bond program that would help pay for its claims if there was a disaster.
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