The nonprofit, state-supervised property insurance agency for coastal Texas counties is expected to shore up its finances by the end of the year, the group told a state House panel on Monday.
Pete Gise, who handles The Texas Windstorm Insurance Association’s finances, said that after being in debt since 2012, the association projects it will see its first surplus by the end of the year.
The association known as TWIA serves as the insurer-of-last-resort for residents in coastal counties who can’t afford property insurance on the regular market. It has been subsidized with fees from for-profit insurance companies.
TWIA recently settled $135 million worth of lawsuits that claimed it didn’t pay policyholders for legitimate damage caused by Hurricane Ike in 2008. The association also told the House Insurance Committee that it will have enough money to pay out pending claims from the storm.
Now TWIA is projecting a $14.7 million surplus by the end of 2013, according to a presentation provided to the committee.
The agency had a $183 million deficit in 2012, most of which was due to the legal costs stemming from the lawsuits. Following the May settlement, officials say that figure has already been cut to $114 million and continues to shrink.
If there is no change in state insurance laws and the trend of the agency’s funding stays as predicted, the surplus could grow to $211 million, Gise said.
Lawmakers, however, were critical of how the association has dealt with paying out claims in the past, saying TWIA could find better ways to prevent money being wasted.
David Durden, a lawyer with the association, said TWIA paid claims for damaged property based on the owner’s estimate.
“I can’t see [insurance companies such as] State Farm, or an All State, or Farmers doing business this way,” said committee chairman Rep. John Smithee, R-Amarillo. “For one thing, they would be out of business.”
The Texas Department of Insurance has had oversight of TWIA for the past three years. Newly-appointed state Insurance Commissioner Julia Rathgeber, who was confirmed by the Senate just last week, has said her department will keep control of TWIA until it proves to be financially stable on its own.