Texas Lawmakers to Consider TWIA Funding, ESG This Legislative Session

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Texas lawmakers returned to Austin this week for the start of the 88th Legislature, which portends to be a relatively quiet legislative session for hearing property and casualty concerns.

“I think insurance is probably not a top priority,” said Albert Betts, Executive Director of the Insurance Council of Texas. “There’s no crisis here in Texas, thankfully, unlike Florida and Louisiana. But there’s always an issue or things being proposed to tweak or change.”

The top insurance issue lawmakers will consider is addressing the funding structure of the Texas Windstorm Insurance Association (TWIA), which provides wind and hail coverage to the state’s 14 coastal counties and a portion of Harris County. TWIA relies on a reserve trust fund, public securities, premiums and assessments on P/C insurers. TWIA is required by the state to have total funding in an amount not less than the 1 in 100 probable maximum loss (PML) for the association for a catastrophe year with a probability of one in 100.

In the event of a major storm that drains the association’s reserve fund, TWIA would have to issue bonds and public securities up to $1 billion.

“They end up using debt to help fund and pay for losses,” said Betts. I think the discussion this session will be how do we find a way to fund that’s not based on debt, and whether that’s going to be something the state contributes or not or that is in some way funded by a broader state-wide surcharge on certain policyholders.

TWIA is expected to take on increased reinsurance costs this year.

The association’s Actuarial & Underwriting Committee recommended Tuesday the TWIA Board establish $5.2 billion as the association’s PML for the 2023 storm season, up from $4.2 billion in 2022. The TWIA Board will hear the committee’s recommendation at a Jan. 19 meeting.

Another topic that is sure to invoke discussion is whether insurers should be restricting from considering Environmental, Social, and Governance (ESG) type issues in their investments.

“The issue has come up, if companies or insurers are choosing not to invest in fossil fuel for example, is that something Texas wants to support, or is that something Texas believes insurance companies should be doing,” said Betts. “Whatever California is doing, Texas is doing the opposite.”

Insurers also have their eye on legislation that would mandate original-equipment manufacturer (OEM) parts for certain, newer vehicles.

A bill last session would have prohibited insurers from requiring the least expensive part to be used, and similar language is expected again in a bill this session.

Insurers expect to see some bills related to the appraisal process for home and auto claims. Proposed legislation would require appraisal to be mandated or at least included in auto policies and then specifying certain appraisal procedures for home and auto, said Betts.

Questions popped up after an insurer attempted to limit the appraisal process to only total loss situations, which prompted consumer groups and auto body repair groups to allege that the appraisal process should be mandated as part of the insurance contract.

Another bill with insurance implications would make catalytic convertor thefts a state jail felony.

In the next few weeks the legislature will start naming committee chairs. Rep. Tom Oliverson (R-Cypress) is expected to chair the House insurance committee.

Betts said so far 60-70 P/C bills have been filed, and in a typical session the industry ends up tracking 300-400 P/C bills. The legislature has until March 10 to file bills.

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