 Texans have come to understand that hurricanes are an inevitable hazard of life along the Texas coast. The high-cost but low-frequency nature of hurricanes makes it easy to ignore the perils of building along the coast. What seems an easy solution to the problem of insurance rates along the coast remains a free lunch only as long as no hurricanes strike.
The Texas Windstorm Insurance Association was originally envisioned as an insurer of last resort. TWIA provides wind and hail damage when insurance companies exclude it from homeowners and other property policies sold to coastal residents. However, since insurance companies have been walking away from what they see as a potential powder keg, this has left the state to become the de facto provider along the coast.
A task force of Texas REALTORS® looked at how insurance rates affect Texas homeowners. One frequent topic was why Central Texas, the Panhandle, the Big Bend Area, and every other region in the state has to subsidize the Gulf Coast? If that’s your question, I could shame you into thinking that as Texans we have a mutual responsibility to help each other, and it is the right thing to do. If altruism is not your cup of tea, though, perhaps you would care for a pint of enlightened self-interest?
In 1941, while most of the world was embroiled in a global conflict, Americans, buffered by two oceans, were adamantly favoring isolationism. Yet, the United States would have to enter the war eventually. Franklin D. Roosevelt, eager to ensure public consent for his controversial plan, explained in one of his most famous fireside chats that this plan was comparable to one neighbor lending another a garden hose to put out a fire in his home. The metaphor was perfect: If we do not put out the fire next door now, it is going to eventually spread to our house.
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The same goes for storm damage on the coast. As much as we would like to think that every municipality and region is not interconnected, the truth is that we are more connected than you realize. The Texas Gulf Coast is vital to the Texas economy, with linkages to all regions of the Lone Star State. The coastal area is the site of major concentrations in industries like petroleum refining, petrochemicals, and shipping that are crucial to the present and future economic health of the state.
A study by the Perryman Group concluded that a Katrina-sized storm would have a significant effect on the economy of Texas. A Katrina-level storm would lead to losses of $52.2 billion in gross state product, almost 617,000 permanent jobs, and nearly $1.8 billion in annual state revenue. This loss of revenue would necessitate either a huge cut in services or an increase in taxes.
The Gulf Coast, particularly the Houston-Beaumont area, is one of the world’s densest concentrations of oil refineries. The Texas Gulf Coast produces more than four million barrels of refined petroleum products per day. This amount is 87% of the total for Texas, and nearly 25% for the entire United States. Now we’re talking about national implications.
It is imperative that the Texas Legislature adopt measures in the upcoming session to ameliorate the damage a large hurricane would inflict on the state coffers and the goods and services that every citizen relies upon. There are many ideas being floated around at the moment on how to shore up TWIA. When a sensible measure is proposed that may cost us in the short-run (resulting in higher insurance premiums), we Texans must show a united front and support these sweeping measures, even if they will not directly benefit your neck of the woods. “Texas, one and indivisible!" |
