No Rate Hike for Texas Windstorm Insurer, State Insurance Regulator Decides

The Texas Department of Insurance has denied a petition by the Texas Windstorm Insurance Association (TWIA) to increase policyholder rates by 10%. Public comments showed a rate increase “would be unjust and unfair because of the hardships a rate increase would impose on the coast,” Texas Department of Insurance Commissioner Cassie Brown wrote in the department’s decision.

Only three of the 492 submitted public comments supported a rate increase.

The news comes at a time when TWIA says it will need to empty its financial reserves to cover losses stemming from Hurricane Beryl because current rates are not keeping pace with claims caused by natural disasters.

This marks the fifth time in the last six years that the state’s department of insurance has denied such a request from the TWIA. It approved a TWIA request for a 5% rate increase in 2022.

This recently rejected rate increase would have been effective for all new and renewed policies starting Jan. 1, 2025.

Will rejecting rate increases lead to future problems?

TWIA provides hail and windstorm coverage to more than 270,000 residential and commercial policyholders, operating as the insurer of last resort along the Gulf Coast. TWIA provides coverage in 14 different counties.

The association maintains that the rate increases it requested are necessary for the insurer to continue to reliably pay claims, meet the needs of a growing number of policyholders, and keep pace with rising construction costs. TWIA states that its rates are below state averages and that rate increase denials could force the association to pass on special fees to insurers across Texas.

These fees would then be passed on to the insurers’ policyholders, ultimately raising premiums.

TWIA’s actuarial staff recently found that the association’s rates are “inadequate” by 38% for residential coverage and 45% for commercial policies. The TWIA forecasted the amount of money it would need to cover future losses and compared that estimate to existing premium revenue.

The association has recently paid out more than $259 million to cover damage caused by Hurricane Beryl. TWIA officials expect that Beryl-related claims will ultimately empty its $450 million reserve fund. Texans have filed more than 31,000 claims for damage from Beryl, according to Brown’s written decision.

What’s next? Legislators looking for answers

While TWIA was hoping to increase rates to help balance its growing needs, Texas legislators are hoping the next legislative session can find a solution.

Texas Lt. Governor Dan Patrick and House Speaker Dade Phelan have pledged lawmakers will work toward solving the state’s rising insurance costs during this legislative session, which begins Jan. 14, 2025. In addition, legislators who took part in the public comment period related to TWIA’s rate increase request also asked for the chance to handle TWIA’s funding in the next legislative session.

If lawmakers can find a solution to the state’s insurance crisis, it would be welcome news for residents across the state. Texas homeowners pay an average of $4,437 per year for home insurance coverage, according to Insurify data. Texas has the fourth-highest homeowners insurance rates in the nation.

While its rates haven’t climbed with the ferocity of those in Florida or Louisiana, Texas’ unique position, facing both hurricane and tornado threats, means controlling insurance-related costs will be an ongoing issue in 2025 and beyond.

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