Fair Contractor Markets - The Trouble With TWIA Liability

Roofing Business Talk
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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.

http://www.tdi.texas.gov/pubs/pc/pctwiabrief.ppt

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 In September 2005, $65 million was withdrawn from the CRTF to pay excess losses resulting from Hurricane Rita.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?

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I have a thought.

For a guy who claims to be only a contractor concerned with restoring homeowner’s property damage you sure spend a lot of time talking about the legal and insurance side of things. What the hell does this have to do with you providing estimates to homeowners?

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I don’t understand TWIA completely but isn’t it in place to provide coverage to areas that are at such a high risk the other P&C companies won’t insure them? Or maybe said differently, won’t insure them at an affordable rate?

Assuming that is true or close to it, what can be done? If the risk and subsequent payout in claims is greater than premiums paid in, obviously, there is a shortfall.

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[quote=“dstew66”]I have a thought.

For a guy who claims to be only a contractor concerned with restoring homeowner’s property damage you sure spend a lot of time talking about the legal and insurance side of things. What the hell does this have to do with you providing estimates to homeowners?[/quote]

When you understand that a potential financial and social catastrophe for families, meaning children, the elderly, and others, and communities, exist after a “event” can be avoided by insurers putting people ahead of profiteering, then maybe you will somewhat understand why I write about various concerns.

We/I love people. Even hardheaded ones.

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[quote=“Authentic_Dad”]I don’t understand TWIA completely but isn’t it in place to provide coverage to areas that are at such a high risk the other P&C companies won’t insure them? Or maybe said differently, won’t insure them at an affordable rate?

Assuming that is true or close to it, what can be done? If the risk and subsequent payout in claims is greater than premiums paid in, obviously, there is a shortfall.[/quote]

Exactly! And in other research the big brains are questioning whether TWIA “insurance” (and all things considered) is maybe just a psychological “peace of mind” pacifier for trusting consumers.

Pretty sure the actuaries, and the Texas DOI, and others, know the “fiduciary imbalance” truth, and it’s real post catastrophe “market” implications.

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That’s great and they may very well know it. How does that help though? Aside from our Federal Government, nobody else can just print money. So what are the alternatives? I guess Texas is a big enough market it is possible to force the P&C Insurance Companies to insure all areas if they want to do business there. However, that would simply increase the rates for everyone else in the state and I’m guessing, given the high incidence of hail damage storms already, that would suck for the rest of the state. TWIA could raise their rates to match the risk liability. That would obviously suck for those forced to use TWIA and essentially, defeat the purpose.

Unless you’re suggesting some other entity is stealing the funds or employees are embezzling, I’m not sure what you’d propose doing? I’m guessing Texans insured by TWIA better just hope there isn’t another major storm until TWIA has a chance to build up their reserves.

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Or…Insurers stop segregating risks…and get back to spreading risk over their WHOLE book of business.

“But that would raise rates for everyone”. Really? Or would it simply stabilize and equalize the overall rates here, and all that that means across the whole nationally insured market?

Some could say that all others are subsidizing the Texas market, and Texans could say…we are subsidizing Super Storm Sandy events, and earthquakes, and fires, etc.

Seems like indemnification segregation validates higher premiums - synthetically - for an end game of unnecessary higher profits across the board, in the overall U.S. market. Just sayin.