Friday, July 24, 2009 posted by admin


# 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.


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

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