© 2011 The Heartland Institute. Nothing in this report should be construed as supporting or opposing anyproposed or pending legislation, or as necessarily reflecting the views of The Heartland Institute.
Steve Miller, “Texas’ government-operated property insurance agency – TWIA – found “hazardous tothe public” in the wake of Texas Watchdog’s reporting,” February 28, 2011, www.texaswatchdog.org/2011/02/texas-government-operated-property-insurance-agency-twia-found/1298927853.column.
Texas Windstorm Insurance Association, “About TWIA,” www.twia.org/AboutTWIA/tabid/56/Default.aspx.
Property Insurance Service Office,
2010 Market Penetration Report
Texas Department of Insurance, Hurricane Ike Information Center,www.tdi.state.tx.us/consumer/storms/cpmhurrike.html.
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Just a few days after the allegationsagainst TWIA were made, it was clear the agency’s unique legal structurecontributed to its woes. TWIA isneither public nor private.
Commissioner Mike Geeslin’s order creating administrative oversight – a
state takeover of TWIA’s operations – alleged problems with claims adjustment, fraud reporting, and financialmanagement practices. Press reports have alleged other problems with TWIA’s management andfinancial practices.
Just a few days after the allegations againstTWIA were made, it was clear the agency’sunique legal structure contributed to its woes.Right now, TWIA is neither public nor private: Insofar as it is mandated by state lawand serves a public purpose, TWIA looks likea government entity. Insofar as it competeswith private market players for some policiesit writes, and doesn’t have to follow state purchasing and hiring rules, it looks like a privateentity. (The Texas FAIR Plan Association, which serves as a market of last resort in non-coastalcounties, has the same fundamental structure.) TWIA’s compensation practices, for example,were out of line with government’s – its head made more money than the governor – but notwith those of private insurance companies. As the organization is neither public nor private,oversight of TWIA is both complex and confused.
Two: TWIA Could Cost Taxpayers Billions
TWIA has existed since 1971 and is supposed to provide “last resort” coverage againstwindstorms for property owners unable to find such insurance in the private sector.
Since itscreation, however, TWIA has grown to become the second largest such “market of last resort” inthe United States; it writes more than 3 percent of all property insurance in Texas.
Only onestate, Florida, has a larger government-run or government-mandated property insurer.
In 2008, TWIA paid out claims of more than $3.8 billion and, at the time, had reinsurance andassessment capacity to cover them.
Today, TWIA has no reinsurance and no meaningful ability