In addition to wrecking countless homes and business, Hurricanes Dolly and Ike laid waste to the private insurance marketplace along coastal areas, including Galveston Island. The market was already close to cornered by TWIA, as its rates were below market value, making TWIA an insurer of first resort rather than last, as was intended upon its inception.
By June 1 of this year, a short term fix of about $2 billion will be needed to potential storm damage this year. Texas Department Insurance Commissioner Mike Geeslin discussed options for funding TWIA in the short term so that Texans would not get slammed in the upcoming storm season.

Of course, because its rates have been so low, the costs of claims to TWIA exceed its reserves, so the costs get passed on in the form of assessments to other private insurers in the state, even those located hundreds of miles from the coastline.

Rep. Carl Isett (R-Lubbock) said taking on more exposure would not be in the best interest of the fund. As of the end of January, TWIA general manager James Oliver said, the total exposure of TWIA comes to $68 billion spread throughout the coast.

Beaman Floyd of the Texas Coalition for Affordable Insurance Solutions (an industry group) called for an "incremental evaluation of rates." "If they’re very depressed then incremental raises and if they’re adequate then leave them alone," he said.
"I don’t think that you can price the coast so that all will be written by the private marketplace any time soon but I think what you can do is that you can incrementally allow for pricing on the coast," Floyd continued.

In other words: allow TWIA to raise its rates over time.

Against this backdrop the consumer group Texas Watch came out with a poll on Feb. 26 indicating that most Texans favor stricter laws regulating how insurance companies set their rates.
Smithee questioned whether private companies would step into the windstorm insurance market if Geeslin incrementally raised TWIA's rates. Floyd declined to give a definitive answer but opined that they would.
Smithee also sought Floyd’s input on the state’s possibly removing unlimited liability for companies less subject to windstorm damage. Floyd’s answer: "It would be beneficial to the rest of the state and to TWIA. … It is definitely good for your general marketplace in Texas, and the robust marketplace in Texas actually funds the edges of your marketplace."

Representatives of inland districts, like Carl Isett (R-Lubbock), have pushed for more limited windstorm insurance liability for companies in their districts than for companies that serve clients in real danger of facing wind damage. But those from coastal districts, like Todd Hunter (R-Corpus Christi), argue that inland damages such as from severe thunderstorms and hail cost as much in the long term as hurricanes.

Rep. Craig Eiland (D-Galveston) said Harris County faced considerably more costs in damages from Ike -- $2.4 billion compared to $500 million in Galveston – yet Galveston’s residence are looking to see their homeowners’ and windstorm rates go way up.

Smithee said it would be helpful to get voluntary commitments from individual larger companies, because if they would commit, then smaller companies would follow suit.
Rep. Larry Taylor (R-Friendswood) floated the idea, and Floyd said it would be worth exploring, to cap windstorm deductibles at $300,000 for standard market carriers. Hunter suggested individual companies bring specific suggestions before the committee for incentives to get back into the windstorm insurance market.

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