Texas Insurance Problem Could Be About to Get Worse

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Giulia Carbonaro is a Newsweek reporter based in London, U.K. Her focus is on the U.S. economy, housing market, property insurance market, local and national politics. She has previously extensively covered U.S. and European politics. Giulia joined Newsweek in 2022 from CGTN Europe and had previously worked at the European Central Bank. She is a graduate in Broadcast Journalism from Nottingham Trent University and holds a Bachelor's degree in Politics and International Relations from Università degli Studi di Cagliari, Italy. She speaks English, Italian, and a little French and Spanish. You can get in touch with Giulia by emailing: g.carbonaro@newsweek.com.

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The Lone Star State's home insurance crisis is likely to escalate if its insurer of last resort, the Texas Windstorm Insurance Association (TWIA), goes ahead with plans to increase its rates to match the growing risk posed by extreme weather events.

The association's board of directors is set to vote on a 10 percent hike on residential and business policyholders for 2025 during a meeting on August 6, as reported by The Texas Tribune. That date is also the deadline for residents within the association's jurisdiction to offer their opinion on the prospected rate increase.

As an insurer of last resort, TWIA provides coverage for windstorm and hail damages to homeowners living in designated catastrophe areas along the Texas Gulf Coast who have not been able to get a policy with a private insurance company. Its policies do not cover flood damage.

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Texas Homes Hurricane Flood
Homes are surrounded by floodwater after Hurricane Beryl swept through the area on July 8, 2024 in Surfside, Texas. Windstorm insurance in the state is set to become more expensive for thousands of homeowners living... Brandon Bell/Getty Images

As of June 30, according to data provided by TWIA spokesperson Aaron Taylor to several news media outlets including the Houston Chronicle, the association's average residential premium stood at $2,300. The suggested increase would raise premiums by $230.

In an emailed statement to Newsweek, Taylor explained that, if implemented as recommended, the rate increase would apply to all TWIA policies starting in 2025.

"The Board may also vote to reject the recommendation or to adopt a different rate filing. TWIA is required by law to make its annual rate filing with the Texas Department of Insurance by August 15," the statement reads.

"The TWIA Board understands that rising insurance costs are difficult for our policyholders on the Texas coast. The Board also wants to ensure that the Association has the financial capacity to pay claims for our policyholders when they need us most."

The rate hike was recommended by the association's Actuarial & Underwriting committee after running a rate accuracy analysis. It found that the current rates are insufficient for 38 percent of residential coverage and 45 percent of commercial coverage.

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If approved by TWIA's board of directors, it will be up to Texas Insurance Commissioner Cassie Brown to review and sign off on the increase.

Hurricane Beryl has already caused consistent damage across the Texas Gulf Coast. At the July board meeting, TWIA said it had received 16,000 windstorm insurance claims linked to the tropical storm, which were expected to cost the association over $200 million in payouts. The insurer of last resort's Catastrophic Reserve Trust Fund totals $450 million, as per data reported by the news outlet Texas Scorecard.

Beryl also caused a spike in damage claims for the Texas Fair Plan Association, another insurer of last resort, which offers general residential coverage to homeowners who have been denied a policy by at least two private companies. More than 4,100 Fair Plan claims were made as a result of damage caused by the storm, Taylor told the Houston Chronicle.

Neither TWIA nor the Texas Fair Plan is backed by the state, relying instead on premium revenues, reinsurance, and other sources of funding.

The Texas counties eligible to be covered by the TWIA and likely to be affected by the rate increase are Aransas, Brazoria, Calhoun, Cameron, Chambers, Galveston, Jefferson, Kenedy, Kleberg, Matagorda, Nueces, Refugio, San Patricio, Willacy, and parts of Harris County east of Texas 146.

As of the end of March, TWIA had more than 252,000 policies, nearly 37 percent more than in 2020.

Texas State Representative Todd Hunter, a Republican, has spoken out against the proposed rate hike, writing on X, formerly Twitter: "TWIA plans to raise windstorm insurance rates. This is a terrible time for such an increase. Coastal residents and businesses, please email your opposition to publiccomment@twia.org. Together, we can make a difference."

Texas homeowners already pay some of the highest property insurance premiums in the country. Estimates by LendingTree said the average cost of home insurance in Texas is $5,180 a year for a home with a dwelling coverage—the cost of rebuilding the structure of a home—of $400,000. The national average, by comparison, was $2,801 a year.

Update 7/30/24, 11:20 a.m. ET: This article was updated with comment from a TWIA spokesperson.

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About the writer

Giulia Carbonaro is a Newsweek reporter based in London, U.K. Her focus is on the U.S. economy, housing market, property insurance market, local and national politics. She has previously extensively covered U.S. and European politics. Giulia joined Newsweek in 2022 from CGTN Europe and had previously worked at the European Central Bank. She is a graduate in Broadcast Journalism from Nottingham Trent University and holds a Bachelor's degree in Politics and International Relations from Università degli Studi di Cagliari, Italy. She speaks English, Italian, and a little French and Spanish. You can get in touch with Giulia by emailing: g.carbonaro@newsweek.com.

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Giulia Carbonaro is a Newsweek reporter based in London, U.K. Her focus is on the U.S. economy, housing market, property ... Read more