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Bill Denies Windstorm Insurance Coverage for Casinos

11 March 2011 by admin

TexasA bill has been introduced in the Texas legislature that would prevent the Texas Windstorm Insurance Association from covering casinos, wind turbines or sexually oriented businesses, such as strip clubs and adult video stores.

An amendment to House Bill 272 was introduced by state Representative John Smithee, chairman of the House Insurance Committee. The bill is a major overhaul of the current state law governing the insurance association’s operations. The amendment is meant to make sure taxpayers don’t foot the bill for claims by businesses Texas residents, according to Smithee, find unappealing. Smithee says it’s inappropriate for taxpayers to back insurance on sexual businesses and casinos because they’re, um, immoral or something. As for the wind turbines, he says they should be excluded because no one has yet developed an actuarial model for their insurance value. Plus, let’s be honest, what are the chances of a wind turbine going through a windstorm undamaged, anyway? I mean, who would want to insure that!

john-smithee05Of course, the whole point of the Texas Windstorm Insurance Association is to provide insurance coverage as a last resort when no private insurance company will do so. The association is a pool of insurance carriers set up by the state and financed by tax credits, among other things.

In 1970, Hurricane Celia devastated the Texas coastline, causing $453 million in damage ($2.6 billion in today’s dollars, adjusted for inflation), killing 15 and injuring 466 people. As a result of the massive damage, many insurance companies felt it was too risky to do business in that area of Texas. As companies began to pull out of the market, it became difficult for Texans to get property and casualty insurance. The state then stepped in and created the Texas Catastrophe Property Insurance Association, which is now called the Texas Windstorm Insurance Association.

Every insurance company that covers property and casualty insurance is required to be a member of the pool that comprises that Association. It is a requirement for authorization to write insurance policies in that region of Texas. The Association provides wind and hail insurance for those who are unable to obtain it from private insurers.

The premiums paid by the insured parties goes into the pool and whenever a claim is paid out, it is funded by those premiums and, if necessary, by the individual insurance companies that are part of the pool. They can then be partially reimbursed by the state through tax credits.

Smithee’s bill singles out three industries and denies them coverage through the Texas Windstorm Insurance Association. If they can obtain coverage through a private insurer, they are fine. Otherwise, they will have to be uninsured and hope a hurricane doesn’t wipe out their business. As you can imagine, owners of casinos, adult businesses and whoever owns those stupid wind turbines aren’t too pleased.

On Tuesday, the House Insurance Committee will meet and hold a hearing on Smithee’s bill, as well as another bill to reform the windstorm association, proposed by Representative Larry Taylor. The association currently insures more than 200,000 policyholders in high-rick coastal communities in the state.

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