The Texas Storm Insurance Association (TWIA) reported a significant deterioration in the adequacy of its current rates this year, according to an analysis released ahead of the board’s vote to submit rates.

The association found that residential rental rates were 38% inadequate, up 18% from the previous year. Commercial rental rates more than doubled, rising from 22% to 45%.

According to a report by AM Best, TWIA attributed this situation to an increase in the number of policies, the need for more reinsurance, and economic inflation that led to higher labor and material costs in construction.

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Breaking down pricing components, TWIA noted that reinsurance, one of three fixed expense categories, rose 20.5% this year to 44% for residential coverage and increased 24% to 50.4% for commercial coverage.

TWIA has set a statutory target of $6.5 billion for coverage for the 2024 storm season, making it a potential maximum loss for the season of 1:100. That level of funding is $2 billion more than TWIA received in 2023. The agency added more than 25,000 policies over the previous year, and the total insured value of covered property increased 26.4%.

Read more: TWIA Outlines Financial Preparations for 2024 Storm Season

TWIA said in its price adequacy analysis that operating expenses decreased 2.3% to 5.2%, and there are currently no outstanding debts. Variable expenses decreased 0.1%, and provisions for non-hurricane and hurricane-related losses decreased.

For nearly two decades, annual analyses have routinely reported inadequacy rates of 26% or more for residential and 21% or more for commercial. However, rates have remained unchanged for seven years since 2008, with increases of 5% in most other years.

State law requires TWIA to publish a rate adequacy analysis at least 14 days before its board votes on the rate file.

TWIA is committed to submitting a pricing profile to the Texas Department of Insurance by August 15 of each year. Public comment on the upcoming profile will be received at the Actuarial and Underwriting Committee meeting on July 15 and at the TWIA Board of Directors meeting on August 6, where the profile will be decided.

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