Windstorm Fund A Leading Issue At Texas Capitol

By: AP
By: AP
Hurricane Ike was the big storm Texas officials feared would hit the coast. Now comes the hard task of paying for it.

Courtesy KHOU.com, submitted by an 11 News viewer.

AUSTIN, Texas -- Hurricane Ike was the big storm Texas officials feared would hit the coast. Now comes the hard task of paying for it.

When lawmakers convene Tuesday, they'll face the financial devastation left by the Category 2 storm that walloped the upper Gulf Coast on Sept. 13, devastating Galveston and nearby counties.

They'll look to restructure the state's windstorm insurance association, which is filling in the gap left by private insurers who stopped issuing policies in some Gulf coast counties, and consider whether to put money into a state disaster fund that Galveston officials found out the hard way was empty.

"The Legislature was wise in setting up the disaster fund, but we were cheap in not funding it," said Democratic Rep. Craig Eiland of Galveston. "A fund that doesn't have any money in it is pretty much like no fund at all."

Overall, Ike costs could sock state government with a potential $6 billion to $8 billion bill, said House Appropriations Chairman Warren Chisum. Some of that impact may be spread over four years because of the way the Texas Windstorm Insurance Association is set up to allow insurance companies to seek state tax credits over time, Chisum said.

Total Hurricane Ike costs are estimated to top $15 billion, but the state expects the federal government to cover most of that.

Revamping the windstorm fund has been on the minds of some legislators since private companies began pulling away from the Texas coast after hurricanes Katrina and Rita in 2005. The fund - replenished in large part by payments from private insurers - became the last resort insurer for homes and businesses in 14 counties.

Since Hurricane Ike, the windstorm fund has moved into the statewide spotlight.

"Certainly we expect the Legislature will take that up very, very quickly once they convene," said Jerry Johns, president of the Southwestern Insurance Information Service, an organization representing the windstorm association and other Texas property insurers. "It's being talked about by just about every member of the Legislature."

More than $750 million has been paid to windstorm association policy holders for claims from Hurricane Ike, and the final bill is not yet known, Johns said.

Lawmakers may address what type of damage the windstorm fund covers. Currently its policies cover wind and hail damage across the state. The consumer group Texas Watch criticized the windstorm association for not paying for storm surge damage in Hurricane Ike. The association insisted it would only cover destruction from wind, not hurricane-related water damage. Chisum said it may be time for lawmakers to take a stand on the question.

"We probably need to make some legislation that says it doesn't make any difference for insuring the house. So if the house flooded or the house blew away, if you're the insurer you've got to pay," he said.

Besides attempts to rework the windstorm account, there are calls on many fronts for a better state disaster fund.

Republican Gov. Rick Perry's office oversees a relatively small amount budgeted for disaster needs. He asked lawmakers to allocate $50 million to a disaster fund in 2007, but they didn't.

The governor will ask legislators this time for $50 million to $150 million to help pay for evacuations and other immediate costs that arise, said Perry senior adviser Mike Morrissey.

It would be used to reimburse local governments and vendors, like evacuation bus contractors, even if their expenses are covered by federal disaster aid that is slow in arriving. Then if federal dollars come in that money would replenish the state fund. It would not cover personal losses or expand existing reimbursement items, Morrissey said.

Galveston City Manager Steve LeBlanc said the city applied for help from the fund but then learned there was no money in it.

"I find that unacceptable," LeBlanc said.

Numerous communities affected by the hurricane agree, Eiland said, noting that even if the Federal Emergency Management Agency covers a disaster expense, a local government often must provide 25 percent of the cost. In some cases communities wait years for FEMA reimbursements, he said.

"You think the city of Galveston has an extra tax laying around to make those huge upfront payments?" he said. "It seems sometimes FEMA forgets the 'e' stands for 'emergency,' and not 'eventually.'"

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