Costal Windstorm Insurance Coalition

CWIC ‘BULLET’ RESPONSES TO HB 4409 ‘RULES OUTLINES’

# 1 Priority Rule: DECLINATIONS. Important because it controls every policy, every year:

Contrary to TDI outline, the Rules should NOT:

• Disallow a ‘nonrenewal’ as a declination, which by definition it is;
• Be restricted to declinations from insurers writing “new” policies; the law says “writing”;
• Be disallowed because a different insurer offers voluntary coverage [owner will eagerly accept any such offer without compulsion unless it includes serious disadvantages];
• Require owner to accept an offer of coverage at rates higher than TWIA. Owners prefer a voluntary policy—even at a marginally higher rate—the ONLY reason to ‘require’ acceptance is to require acceptance of seriously objectionable offers; it would remove all owner defenses—like baby seals for the harvesting;
• Require agent compliance procedures more extreme than Sec. 2210.202(b).

The TDI outline seems to add onerous language and meanings which are not in the statute.

It should be noted that FAIR Plan 2 year ‘declinations’ procedures are relatively simple, the FAIR Plan policy count has been minimized; TWIA procedures should not be comparably excessive.

#2 Priority Rule: CERTIFICATES OF COMPLIANCE. This already affects almost 20% of TWIA policies; it can be expected to affect a larger fraction of new TWIA policy holders.

· Every owner eligible for this ‘waiver’ of a certificate has been previously insured by a voluntary insurer, proving the property meets ‘normal underwriting standards’—the basic premise for TWIA coverage since 1971.

· Absence of a certificate of compliance [WPI-8] is not proof that the structure is not in fact built ‘to code’;

· The vast majority of properties affected by this program are in north county areas, in which the code is the least stringent;

· Every property will pay a surcharge;

· The program does not create a new exception, it extends an existing program;

· Innocent owners have been unaware of certification because their voluntary insurer did not tell them they needed it—until after they withdrew coverage.

· Sec. 2210.251(f) is crystal clear: TWIA coverage on 9/1/09 is qualification for TWIA coverage indefinitely; no time limit is even suggested.

· Therefore the Rule should not limit the number of renewals;

· The rule should continue the program for new TWIA applicants indefinitely, using the same qualifying criteria;

· Any requirement that a certificate of compliance ever be obtained defeats the primary purpose and value of the program.

#3 Priority Rule: CLASS 2 SECURITIES SURCHARGES. This is an important ‘big deal’, but opens a world unfamiliar to CWIC. Therefore, CWIC merely advocates that the Rule include no ‘surprises’, such as establishing the data on which calculations will be based, or delineating the formula with which surcharges will be calculated. Since it is a known quantity, CWIC considers the manner in which the “Chart” was developed to be the appropriate end result of the Rule. [Copy of Chart attached].

#4 Priority Rule: FLOOD INSURANCE. This is a very big deal, but attaches only to structures in the three classes of “V” zones, built, remodeled, etc. after August 31, 2009; this makes code compliance relatively certain. Cost of insurance for code compliant structures is relatively appropriate. It does have serious implications for costs of the many repairs after a major storm. The only constructive, simple, comment from CWIC is to include “actual cash value” flood coverage as being sufficient to meet TWIA requirements, since that is the maximum collectible under many federal flood policies.

#5 Priority Rule: MINIMUM PREMIUM. This should rarely occur. Adequate ‘exceptions’ should avoid any onerous concerns.

COASTAL WINDSTORM INSURANCE COALITION [CWIC]

By Lee Otis “Otie” Zapp, Jr. www.cwictx.org July 21, 2009

INFORMAL COMMENTS RELATING TO FIVE CONCPTUAL OUTLINES
OF RULES INTENDED FOR THE IMPLEMENTATION OF
HB 4409 AMENDMENTS TO CHAPTER 2210 INSURANCE CODE
(Click Here to view)

CWIC BULLETIN # 7

HB 4409 passes, just hours before

81ST LEGISLATIVE SESSION ENDS

Click Here to view or download Conference Committee Report

Our Coastal team of Senators and Representatives, though less than 1 of  5 in the Senate, and less than 1 of 10 in the House, exerted leadership and determination on behalf of Coastal citizens, fighting off killer bills like, HB 911, and HB 4733, and reducing the problems included in SB 14. The final days saw SB 14 die in the House, then resurected by the Senate–amended to HB 4409, then passed.  The final provisions were hammered out by Conference Committee, including matters first presented to the Conference Committee May 30, and to the public May 31.  Compared to the law it replaces, many of the ’reforms’ still in the bill are considered helpful to insurers, to the state, to inland Texans, but are troublesome to Coastal Texans.  Many troublesome provisions were removed or limited by our stalwart Coastal Members.  A copy of the final bill is attached.

The biggest success is that action was taken to provide new funding to pay TWIA claims and AVOID a SPECIAL SESSION, with its predictably more dire results.

The most troublesome action is that the new funding is LIMITED, and substantially reduces incentive for insurers to write policies voluntarily in the Catastrophe Area.

A detailed breakdown of the bill and a ‘bullets’ opinion page will be posted on our CWIC website by June 3, 2009.  Please visit www.cwictx.org for this information.

Also to be listed at www.cwictx.org are the Coastal Senators and Coastal Representatives who should be thanked for their substantial efforts on our behalf.

CWIC was more organized in 2009 than it has been in quite a few years, but it is still WAY SHORT of what it NEEDS TO BE to adequately support our Members in the Legislature.  Windstorm change is a never ending pendulum swing.  If each of us, whose economic ‘life or death’ is at stake, do not become much more actively involved–enough to match the activism of the insurance industry–we are VICTIMS of our own malaise.

Windstorm legislation is never ‘over’; CWIC is not going to sleep.  Get involved in BUILDING the communications, studies, active involvement in the many annual windstorm actions.  CWIC needs ‘contact’ persons in each Coastal community to build a grassroots ‘Minuteman’ type readiness.  Please let us know of your interest.

Coastal Windstorm Insurance Coalition

CWIC

www.cwictx.org

Galveston Windstorm Action Committee, Inc., ‘host’ of CWIC

Lee Otis “Otie” Zapp, Jr., President, June 2, 2009

A beautiful sight:
Representatives from the Sabine River to the Rio Grande, including County Judges, Mayors, Council Members, Chamber of Commerce officials, and many dedicated citizens gathered on the South steps of the magnificent Texas Capitol Tuesday, May 5, 2009 to demonstrate that the Texas Coast IS Texas, just as much as any other region of this great state.

Senators and Representatives addressed the crowd, applauding them for taking their day and exerting the effort to come to Austin in person, to leave no doubt about their convictions and the importance of windstorm insurance.  The Legislators assured their constituents that they would spare no effort to assure Fair, Affordable, Available Windstorm Insurance to the people, in the face of the continuing and substantial abandonment of its customers by Texas licensed Insurance Companies.

Deadlines affecting bills not reported out of Committee are narrowing the field of bills which can still become law this session.  The two main bills which remain viable are:

SB 1007, Sen. Hegar, Katy [HB 2233, Isett, Lubbock, companion bill] has passed the Senate, and is ‘pending’ in the House Insurance Committee.  This bill is the Texas Department of Insurnace ’Sunset’ bill, so it is relatively certain to pass.  Several TWIA provisions were swept into the TDi bill, including:

a.) changes to qualify TWIA for federal ’tax exempt’ status [the only 'good' part]; b.) requirement of 2 insurer  ’declinations’ annually to obtain a TWIA policy; c.) ‘Firing’ TDI and giving TWIA the job of ‘toughening’ and conducting building code inspection and certification; d.) [slipped in apparently unnoticed] a providion which would recharacterize reinsurance as ‘operating expense’, setting the scene to ‘double charge’ for part of its cost in TWIA rates–unless it can be amended before passing the House..

SB 14 Sen. Fraser, Horseshoe Bay; has been negotiated in the Senate to remove most of its punitive ’surcharges’, [having no actuarial basis, would have added up to 100% for some properties].  It retains, however, its original provisions which would change the nature of TWIA from its real purpose: a state provided market for property owners abandoned by their Texas licensed Insurance Company.  TWIA would become an adversary contesting Texans access to and affordability of the  last remaining source of windstorm insurance–without which the Coastal Economy will stagnate, to the detriment of the State of Texas. Encourage your Senator and Representative to change this bill completely before it passes the House.

Visit your CWIC website: www.cwictx.org to find a list of key House and Senate members, and the Senate passed version of SB 14.

For CWIC Lee Otis “Otie” Zapp, Jr. 5/14/09