81 BILLION In Potential Liability!!??
$81,000.000.000.00!! in exposure - BIG question - What is the appropriate legal reserve suppose to be in order to able to remain a legally viable entity…?
Thought it’s 20% of potential liability…or approximately 16 Billion Dollars. Could be wrong, and maybe the rules have changed, or maybe there is special financial math for TWIA.
So when another IKE, or bigger storm, or more than one IKE hits, and after reinsurance, and prorated payments by all applicable TWIA P&C participants, what will happen next??
What risk is there for Texas consumers/contractors to not being paid properly after a catastrophic event, if paid at all?
B. Catastrophe Reserve Trust Fund (CRTF)
The 73rd Legislature established the CRTF, effective September 1, 1993, as part of the State’s plan to address catastrophic losses associated with a major windstorm. To fund the CRTF, TWIA deposits excess funds on an annual basis. Additionally, policyholder surcharges for structures insured under the Approval Program are deposited into the CRTF.
The CRTF is a state fund to be held by the Comptroller outside the State Treasury on behalf of, and with legal title in TDI. The CRTF is designed to fund losses in excess of TWIA premiums and other revenue.
If the CRTF is terminated by law, all assets of the CRTF revert to the State.
The initial balance of the CRTF in fiscal year 1995 was $122,761,481.73. In September 2005, $65 million was withdrawn from the CRTF to pay excess losses resulting from Hurricane Rita. Subsequently that year, TWIA returned $30 million to the CRTF. On June 30, 2008, the balance of the CRTF was approximately $468 million. $100 million of the CRTF was used to pay excess losses resulting from Hurricane Dolly in July of 2008. The remainder of the fund was used to pay for excess losses resulting from Hurricane Ike in September of 2008, leaving a balance of $0.
The balance in the CRTF as of January 31, 2013 was $179,290,288.50.
Still figuring out the actual budget for covering claims from the pdf - Seems like there is only about 2-3 Billion to cover potential claims. Hmmmm…Long way away from 16 Billion.
Any thoughts from others?