Texas Wind storm Insurance Association policyholders received some good news last week when its board announced there wouldn’t be any increase in premiums over the next year.
Well, it seemed like good news, but is it really?
Saving a bit of money in the short term might make coastal homeowners sweat a little less when they go to check their bank accounts, but they shouldn’t rest easy because disaster doesn’t strike when it’s convenient for policyholders.
A TWIA board meeting in Galveston last week resulted in a decision to not increase rates on commercial and residential policyholders. At face value, this seems like a good thing. After all, as TWIA General Manager John Polak said, residents are still recovering from the effects of Hurricane Harvey.
With the costs of rebuilding and preparing for future storms, those who live along the coast have a lot of financial worries, so to them there is likely much rejoicing at the moment.
But much like a sandcastle on a beach, what looks impressive in the sun can be quickly have its foundation washed out from underneath it.
TWIA pulls funding from a number of tiered sources, first of which being the Catastrophe Reserve Trust Fund, which is where premiums go into.
The association announced in October 2017 that it expected Harvey would gobble all of that up. That’s all in one year after a single major storm.
“If we were to have another hurricane right now, it would wipe out their checking account and they would have to go into savings,” said Mark Hanna of the Insurance Council of Texas said about the recent decision.
And as we previously wrote, Senate Bill 615 gives policyholders the option to pay their premiums through installments and by credit card. So the cash reserve TWIA had on-hand when Harvey struck might not be there for the next storm.
A pattern is emerging of TWIA becoming more affordable for policyholders.
This trend is concerning, because while living on the coast is already expensive, insurance isn’t the ideal place for homeowners to be cutting expenses.
We are almost two years from Harvey now, and the Texas coast has largely been spared in that time, so it’s easy for everyone to calm down and be lulled into a sense of comfort once again.
This latest decision doesn’t undercut the dependability of TWIA, but storms don’t wait until it’s convenient to strike.