Texas insurers are seeking state approval of a plan to bolster a windstorm insurance pool for coastal property owners at risk during hurricane season.
The industry wants the Legislature to approve $800 million in bonds to boost the Texas Windstorm Insurance Association, a pool that insures residential and commercial property owners along the coast who can’t get other coverage.
The industry has asked Gov. Rick Perry to add the issue to an expected special legislative session in April.
“If we don’t do something to increase the capacity of (the insurance pool), the state of Texas will have an economic catastrophe on its hands,” said James Langford, vice president of the Texas Farm Bureau Insurance Cos. and a director of the windstorm insurance pool.
The pool, which is an insurer of last resort, covers 101,000 residential and 10,000 commercial policyholders in 14 counties directly on the coast and in coastal portions of Harris County.
A hurricane hitting Galveston with winds of 140 mph and continuing into Houston and Harris County would wipe the pool out, according to the Association of Fire & Casualty Companies in Texas. With losses in the billions, there would be no money to cover a second or third hurricane striking the state.
Industry spokesman Mark Hanna said insured windstorm losses from Hurricane Rita totaled $2.4 billion in southeast Texas, including interior counties, last year. About $150 million of that was covered by the coastal pool.
Spokeswoman Kathy Walt said Perry is still considering whether to include hurricane-related legislation if a special session is called. However, the session’s priorities would be school finance and property tax relief, she said.
The windstorm insurance association provides $26 billion in wind and hail coverage for policyholders. The pool currently is funded at $1.3 billion, and any losses beyond that would be covered by insurance companies. The companies would recover their additional costs through credits on their state premium taxes.
The $800 million in requested bonds would be backed by surcharges on policyholders. Jim Oliver, the association’s chief executive officer, said surcharges would be imposed when additional funding was required to pay damages after a hurricane struck. In the meantime, the association would use existing revenues to cover bond costs.
The surcharge on a policyholder in the coastal area would be less than 3 percent, Oliver said. Property owners in other parts of the state would pay a surcharge of less than 1 percent on their policies.
Oliver said directors of the coastal windstorm pool also will likely ask the state insurance commissioner for a 10 percent premium increase for policyholders covered by the pool. The average homeowner currently pays $600 a year.
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