Print
E-mail
Comment
Rate
Experts say Texas still unprepared for major hurricane
The Texas insurance industry has a worst case scenario for the 2006 hurricane season and it doesn't bode well for consumers or insurers. If a hurricane packing 140-mile an hour winds makes landfall at Galveston or the immediate area and proceeds inland striking parts of Houston and Harris County, insured losses will reach several billion dollars. The Texas Windstorm Insurance Association (TWIA) would go broke and there would be no funds left to pay for losses if a second or third storm hits the state.
TWIA provides $26 billion in windstorm coverage for residential and commercial property along the Texas coast. Forty-four percent or $10.3 billion of TWIA's insured property lies in Galveston County.
TWIA currently pays losses through a multi-leveled catastrophic funding mechanism which comes from insurance companies, reinsurers and TWIA's past premiums. This funding currently totals $1.3 billion. Any of TWIA's insured losses which exceed $1.3 billion will come directly from insurance companies who can recover these additional payments through tax credits which come from the state's general revenue fund.
“Every Texan, not just those who choose to live along the Texas coast, will be affected by a major hurricane,” said James Langford, vice president of the Texas Farm Bureau Insurance Companies and a member of the TWIA board of directors. “If we don't do something to increase the capacity of TWIA, the state of Texas will have an economic catastrophe on its hands.”
The TWIA board of directors as well as a majority of insurers has proposed a series of bonds which could provide an economic defense to any catastrophic hurricane. Under the proposal, pre-event bonds would be paid by policy owners living along the Texas coast, while post-event bonds would be paid by policy owners throughout the state. Any bonding program would require legislative action. The bonds would be paid through minimum assessments only after a major hurricane strikes.
“These bonds could increase the TWIA funding mechanism up to $3 billion putting us in much better shape to handle the effects of a major hurricane,” said Langford. “If we do nothing and a catastrophic hurricane strikes, you will see insurance companies go insolvent, claims go unpaid and the state's economic recovery take years instead of months. Visualize Louisiana or Mississippi right now and you'll get a better understanding of where we could be.”
Fortunately, major hurricanes have bypassed much of the state over the past 20 years. Last year, Hurricane Rita had a bull's eye for the middle of the Texas coast, then turned sharply to the east making landfall in southeast Texas causing an estimated $2.4 billion insured losses. In 2003, Hurricane Claudette caused most of its $100 million in insured losses in Victoria. In 1999, Hurricane Brett and its 140-mile-per-hour winds roared through Kenedy County, the least populated area of any county on the U.S. coastline, causing little damage. It was all the way back to 1983 when Hurricane Alicia blew through Galveston and Houston causing nearly a billion in insured losses.
Since 1983, TWIA's coverage has grown from $2 billion to today's $26 billion and it could reach $30 billion by the end of this year.
“Our last chance to prepare for the 2006 hurricane season, which we have been told will be another bad year for storms, will be this upcoming special session of the Texas Legislature,” said Langford. “I think we are much better prepared for evacuations and search and rescue missions, but when it comes down to having money in the bank to pay for all of these expected losses, it's not there.”
Editor's note: This guest column was provided by Mark Hanna, manager, public relations for the Insurance Council of Texas.
TWIA provides $26 billion in windstorm coverage for residential and commercial property along the Texas coast. Forty-four percent or $10.3 billion of TWIA's insured property lies in Galveston County.
TWIA currently pays losses through a multi-leveled catastrophic funding mechanism which comes from insurance companies, reinsurers and TWIA's past premiums. This funding currently totals $1.3 billion. Any of TWIA's insured losses which exceed $1.3 billion will come directly from insurance companies who can recover these additional payments through tax credits which come from the state's general revenue fund.
“Every Texan, not just those who choose to live along the Texas coast, will be affected by a major hurricane,” said James Langford, vice president of the Texas Farm Bureau Insurance Companies and a member of the TWIA board of directors. “If we don't do something to increase the capacity of TWIA, the state of Texas will have an economic catastrophe on its hands.”
The TWIA board of directors as well as a majority of insurers has proposed a series of bonds which could provide an economic defense to any catastrophic hurricane. Under the proposal, pre-event bonds would be paid by policy owners living along the Texas coast, while post-event bonds would be paid by policy owners throughout the state. Any bonding program would require legislative action. The bonds would be paid through minimum assessments only after a major hurricane strikes.
“These bonds could increase the TWIA funding mechanism up to $3 billion putting us in much better shape to handle the effects of a major hurricane,” said Langford. “If we do nothing and a catastrophic hurricane strikes, you will see insurance companies go insolvent, claims go unpaid and the state's economic recovery take years instead of months. Visualize Louisiana or Mississippi right now and you'll get a better understanding of where we could be.”
Fortunately, major hurricanes have bypassed much of the state over the past 20 years. Last year, Hurricane Rita had a bull's eye for the middle of the Texas coast, then turned sharply to the east making landfall in southeast Texas causing an estimated $2.4 billion insured losses. In 2003, Hurricane Claudette caused most of its $100 million in insured losses in Victoria. In 1999, Hurricane Brett and its 140-mile-per-hour winds roared through Kenedy County, the least populated area of any county on the U.S. coastline, causing little damage. It was all the way back to 1983 when Hurricane Alicia blew through Galveston and Houston causing nearly a billion in insured losses.
Since 1983, TWIA's coverage has grown from $2 billion to today's $26 billion and it could reach $30 billion by the end of this year.
“Our last chance to prepare for the 2006 hurricane season, which we have been told will be another bad year for storms, will be this upcoming special session of the Texas Legislature,” said Langford. “I think we are much better prepared for evacuations and search and rescue missions, but when it comes down to having money in the bank to pay for all of these expected losses, it's not there.”
Editor's note: This guest column was provided by Mark Hanna, manager, public relations for the Insurance Council of Texas.
 |
||
| County sidelines |
Article Rating
Reader Comments
The following are comments from the readers. In no way do they represent the view of rockportpilot.com.
Submit a Comment
We encourage your feedback and dialog, all comments will be reviewed by our Web staff before appearing on the Web site.
