With hurricane season halfway over for 2008, Louisiana has so far dodged the bullet but Texas has taken on two warning shots with Hurricane Dolly and Tropical Storm Edouard. As hurricanes and tropical storms go, neither packed a lot of punch, but together they did enough damage to impact the Windstorm Insurance Association (TWIA), the insurer of last resort for wind coverage along the Texas coast.
TWIA is paying hundreds of millions of dollars in claims generated by Dolly, which hit the south end of the Texas coast, and Edouard, which made landfall on the northern coastline. In an e-mailed statement, the Texas Coalition for Affordable Insurance Solutions (TCAIS) reported that TWIA has used all of its cash on hand, assessed the statewide property insurance market $100 million and used a substantial portion of its catastrophe reserve trust fund.
As a result, any additional storms will likely force TWIA to severely deplete the remainder of the catastrophe reserve trust fund and once again assess Texas’ homeowners insurance companies which may create long-term consequences for the state’s tax collections.
Beaman Floyd, executive director TCAIS, warned that, “With the second, more traditionally volatile, half of the season remaining, even Texans living hundreds of miles from the coast should hope additional storms spare our state. Though TWIA has some access to reinsurance and additional assessment authority, it is running through its various layers of funding very early. Another storm, especially a stronger one, could create real havoc in the state’s insurance market and impact the State’s general revenue fund.”
TWIA funding has been a sore spot for the state’s insurance industry for years; many believe TWIA is vulnerable should a Hurricane Katrina-like storm hit heavily populated areas of the Texas coast. A bill calling for a restructuring of the association that included a provision for the issuance of pre-event and post-event bonds as a way of generating capital to supplement reinsurance and TWIA’s reserves died on the last day of the legislative session in 2007. The proposal is expected to be resurrected in 2009.
Meanwhile, Tropical Storm Gustaav is churning in the central Caribbean, according to the National Hurricane Center, and moving in a northwesterly direction, straight for the Gulf of Mexico.
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