AUSTIN, Texas (AP) -- The Texas Windstorm Insurance Association board of directors voted on Monday to delay deciding whether the company that provides severe weather coverage to homeowners and businesses along the coast should go into receivership.
The association best known as TWIA has been in serious financial trouble for years and is $183 million in the red, mostly because of lawsuits filed after Hurricane Ike. The Texas Department of Insurance presented the board with a resolution for it to request rehabilitation through receivership, which is a legal status similar to bankruptcy that is intended to allow businesses to reorganize.
The association is the insurer of last resort for 266,000 homeowners and businesses who cannot find commercial insurance because of the risk of hurricanes or severe storms. TWIA relies on premiums and assessments placed on Texas insurance companies to subsidize the coverage because of the high risk of catastrophic losses.
Following major hurricanes and mismanagement, though, many question whether TWIA can provide coverage if another hurricane strikes because of recent court losses. The Legislature overhauled the association in 2011, but the problems persist.
Before the board met Friday, a bipartisan group of lawmakers from the 14 coastal counties wrote to the board demanding that it reject receivership, and six elected officials from the coast testified in person that it would create financial havoc in their communities. Receivership would freeze all ongoing lawsuits, make it more difficult for the association to find funding and delay payouts to policyholders who suffer losses.
While the board has raised premiums on homes and businesses along the coast, the letter from four Democrats and two Republicans pointed out that the board has not raised the assessments on insurance companies since 2008. When TWIA's executive director recommended hiking the assessment to finance the payouts for Hurricane Ike, the five board members appointed by the insurance companies rejected the proposal while the four members representing consumers approved it.
"It is not too late for the board to take action, to assess the member companies, put $600 million in the (association's) Trust Fund and shore up TWIA's funding situation which would eliminate the need to even discuss receivership," said the letter, printed on Houston Democratic Rep. Joe Deshotel's stationary.
The board did not rule out receivership on Monday, but said it would take up the issue again at its next meeting on May 21. In the meantime, the board recommended entering into talks to reduce the amount the association owes as a result of recent lawsuits.
The Legislature is also considering several measures that could change how the association operates.