With a giant Hurricane Ike taking aim at the upper Texas coast, the value of insured property at risk is huge, according to the Insurance Information Institute.
The total value of insured coastal property in Texas was more than $895 billion in 2007, an increase of 21 percent, or $255 billion, since 2004. And that number continues to climb as new construction continues along the coast. In 2007, more than $2.3 billion in new construction was under way in Galveston alone. Galveston, which is expected to bear the brunt of Ike’s massive storm surge, is vulnerable to $33 billion in insured losses, the I.I.I. indicated.
Only Florida ($2.5 trillion) and New York ($2.4 trillion) have more property exposed to hurricane loss.
All companies licensed to write property insurance in Texas are required to be members of the Texas Windstorm Insurance Association, the insurer of last resort along the Texas coast. TWIA has an estimated exposure, including additional living expenses and business interruption coverage, of $66.6 billion. That exposure, too, has continued to climb. As of Aug. 31, 2008, the total number of policies in force in TWIA was 224,468, up from 216,008 at Jan. 1, 2008.
In the event of a catastrophic storm or hurricane within TWIA’s coverage territory, all member insurers share in the association’s losses based on their percentage participation in that policy year. Each insurer’s percentage participation is based on their company’s statewide sales versus sales within TWIA’s territory.
TWIA has total funding of $2.3 billion for the 2008 hurricane season. The funding structure comprises insurer assessments, the state’s Catastrophe Reserve Fund and reinsurance purchased by TWIA. Once these funds have been depleted, any losses to TWIA in excess of $2.3 billion would be financed via an unlimited assessment on insurers that is recoverable through premium tax credits.
To date, TWIA has made only three assessments of its member insurers. A $100 million assessment was made after Hurricane Dolly struck the southern Texas coast in July 2008. A $100 million assessment was also made in 2005 after Hurricane Rita struck the upper Texas coast causing major damage in Jefferson, Chambers and Galveston counties. Hurricane Alicia, which struck Galveston Island in 1983, also led to a $157 million assessment.
Source: Insurance Information Institute, www.iii.org
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