TWIA rates determine the amount of premium charged to each TWIA policyholder. Adequate rates help ensure TWIA can meet its financial obligations. Rates are set by the TWIA Board of Directors and subject to review by the Texas Department of Insurance (TDI).
How Premiums are Calculated
Premiums are calculated based on standard rating factors, including amount of insurance, type of construction, deductible amount, and any optional additional coverages. Decisions policyholders make when personalizing their policy will affect their premium payment amount. This can include making changes to their coverage (ex: adding endorsements), adjusting the deductible amount, and adjusting the policy limit amount.
TWIA does not use credit scoring or territorial rating. Premium credits are available for items certified as being built to recent windstorm building codes.
The TWIA Board of Directors voted for a 10% rate increase at the July 31, 2018, TWIA Board meeting. TWIA filed the proposed rate increase with TDI by August 15, 2018, as required by statute. The Commissioner of Insurance must approve the rate filing before it can go into effect.
On October 12, 2018, Governor Greg Abbott sent a letter to Insurance Commissioner Kent Sullivan suspending section 2210.352 of the Texas Insurance Code that prescribes the process for TWIA’s annual rate-filing. In short, he has paused the rate increase decision until after the 2019 legislative session. You can read the letter here.
Premiums may change based on changes in coverage, such as the amount of insurance provided by the policy. The average premium on a TWIA residential policy is approximately $1,600. A 10% increase in 2019 would represent an actual dollar increase of around $160 per year for this policy.
Texas Insurance Code Chapter 2210 requires that TWIA rates be reasonable, adequate, and not unfairly discriminatory. Rates include factors for actual and modeled windstorm losses, operational expenses, repayment of any outstanding bonds, and a reasonable provision for contribution to the Catastrophe Reserve Trust Fund. The statute requires rates to be filed annually with TDI.
Based on a 2018 actuarial analysis, TWIA rates would need to increase by 32.2% for residential policies and 37.3% for commercial policies in order to be actuarially adequate. Current TWIA rates are uniform throughout the 14 first tier coastal counties. Because rates do not vary based on any geographical factors, such as distance from the coast, rates may be actuarially adequate in some areas.
Recent Rate Changes
TWIA’s Board is mindful of insurance costs on policyholders and has chosen to propose a series of smaller rate changes over the years to achieve rate adequacy. From 2011 through 2018 (except for 2017), the TWIA Board authorized staff to file 5% rate increases with TDI; a 0% rate change was filed for 2017. The TWIA Board voted to propose a 10% rate increase with TDI for 2019. The Commissioner’s decision on the rate increase was suspended by Governor Greg Abbott until after the 2019 legislative session, giving the Legislature time to consider TWIA’s rate adequacy and in consideration of policyholder recovery from Hurricane Harvey.