Property and casualty (P&C) insurers providing residential property coverage in Texas will be assessed to cover a $17.6 million deficit incurred by the Texas FAIR Plan Association in 2023, according to a bulletin issued by the Texas Department of Insurance (TDI).
The assessment, requested by FAIR Plan leadership, must be paid by insurers within 30 days of receiving notice. The FAIR Plan has 40 days to report any noncompliance, and carriers that fail to meet the deadline risk suspension or revocation of their certificate of authority until the assessment is paid in full, TDI stated.
The assessments will be calculated based on each insurer’s share of net direct premiums written in Texas during the prior calendar year, relative to the total net direct premiums written statewide.
The TDI noted that insurers may recover the assessment costs through premium surcharges, according to a report from AM Best. However, state regulations prohibit recovery through policy fees or by including the costs in rate calculations.
If insurers choose to implement a surcharge, it must be applied to all property insurance policies issued in Texas, including earthquake, flood, wind and hail, and farm and ranch coverage, not just residential property policies.
Insurers have up to three years to recover the assessment costs but can begin the process at any time within that period. The TDI cautioned that carriers delaying the process could risk under-collecting the full amount.
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While there is no regulatory requirement for notifying policyholders about the surcharges, the TDI indicated that insurers might consider explaining the additional costs to customers.
In October, the Texas FAIR Plan Association and the Texas Windstorm Insurance Association reported more than 40,400 claims related to Hurricane Beryl.
The FAIR Plan attributed $70.3 million in losses to the hurricane, contributing to its 2023 deficit. The TDI is currently reviewing a separate request for an assessment to address the FAIR Plan’s anticipated 2024 deficit.
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