Information Regarding Coastal Windstorm Insurance Coalition [CWIC]
Presentation July 23, 2012
To Texas Windstorm Insurance Association Actuarial and Underwriting Committee in Austin.
Parts of the CWIC Presentation:
1.] CWIC will endeavor to blend its presentation as well as possible with the Coastal Windstorm Work Group, of which Charlie Zahn is Chair, in order to provide a coordinated comprehensive presentation.
2.] CWIC has engaged Actuary Stephen A. Alexander, FCAS, ASA, MAAA, to prepare and present to the Committee a Report, with documented support, of his Review of the Merlinos & Associates, Inc. [Merlinos] Actuarial Rate Level Analysis bearing date April 17, 2012.
3.] CWIC has encouraged Legislators with Coastal Texas districts to attend to the business of the TWIA Committee July 23, 2012.
4.] CWIC has attempted to communicate the matters to be considered at both the July 23, and the August 7, 2012 TWIA Committee and Directors meetings to the public, raising the possibility that officials and interested persons may attend.
CWIC considers the indications reported by Merlinos to have been insufficiently developed, particularly in that Merlinos appears to have based its analysis only on the results of hurricane simulation Models, omitting any consideration of actual experience data [actual experience has been relied upon for at least half of the basis for Texas rate development for over 50 years]. It is stated by James C. Murphy, TWIA Actuary, that “The result of this change is an increase in the overall indications.”
It is believed that the gradation of mandated TWIA building codes and inspection certificates: a.) strongest in seaward part of a county, b.) medium at mid county, and c.) lesser inland-most part of a county; more than adequately equalizes any reduction of wind speed within 30+ miles from shore. If the codes do not materially reduce damage, how justify the code and inspection requirements? A Texas A & M study was produced in the 1990’s to influence the passage of codes even stronger than those then in force; it indicated a clear expectation of a material reduction of damage. Codes were strengthened, rates must remember this accepted fact.