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).
Premiums are calculated based on standard rating factors, including amount of insurance, type of construction, deductible amount, and any optional additional coverages. TWIA does not use credit scoring or territorial rating. Premium credits are available for items certified as being built to recent windstorm building codes.
For 2018, there will be a 5% increase in the rates charged for residential and commercial policies, in accordance with the TWIA Board of Director’s decision at the August 1, 2017 meeting.
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 $1,587. A 5% increase represents an actual dollar increase of around $79 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 2017 actuarial analysis, TWIA rates would need to increase by approximately 30% overall 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 rates increased 5% each year from 2011 through 2016, a cumulative increase of 34% over the six-year period. In comparison, statewide industry homeowner rates from 2011 to 2015 have seen a cumulative increase of 37%. TWIA’s rate changes are consistent with the Board’s desire to achieve rate adequacy through a series of smaller rate increases, minimizing the amount of increase affecting policyholders in any one year. The TWIA Board voted to file for a 0% change in rates for 2017 at the August 2, 2016 board meeting.
Reasons for Rate Changes in Texas
Recently TDI reported that premiums for homeowner’s insurance across the state had increased on average 26 percent from 2010 to 2014. Jerry Hagins from TDI explained that insurance companies average 10-20 years of losses to determine rates, and said that the number of perils in Texas contributes to the increases policyholders are seeing in their premiums. TWIA’s rate changes appear to match overall trends in Texas to respond to costs of disasters over time and to meet the need for actuarial soundness.