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.
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.
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 2019 actuarial analysis, TWIA rates would need to increase by 41.7% for residential policies and 50.0% 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. The following table outlines the rate changes proposed by the Board and filed with TDI since 2011. With the exception of 0% rate changes in 2017 and 2019, TWIA rates have increased 5% each year since 2011; a cumulative increase of 40.7%.
Most recently, the TWIA Board of Directors voted not to increase rates for residential and commercial policies at their August 6, 2019 quarterly meeting. The Board’s decision was conditioned on reevaluating TWIA rates at a later date.