Texas may be stuck with $2.1B insurance tab from Hurricane Ike

AUSTIN – The state could be on the hook for as much as $2.1 billion because of the massive property damage caused along the Texas Coast by Hurricane Ike.

Officials with the Texas Windstorm Insurance Association said today that claims paid by the so-called wind pool – which provides the bulk of coverage on the coast – could reach as high as $4 billion in residential and commercial property losses.

Although insurance companies will initially have to pay most of the claims through mandatory assessments by the state, they will be able to recover those payments through deductions in their state premium taxes. Insurers can generally deduct about 20 percent of their assessments each year.

That means a substantial loss in state revenue over the next several years that could total as much as $2.1 billion, forcing the Legislature to adjust its spending priorities depending on the total state revenue situation.

Five insurance companies will have to pay the lion’s share of the mandatory assessments to cover the wind pool’s losses. In order, based on size of their assessments, they are Allstate, State Farm, Travelers, Farmers and USAA. The assessments are based on market share in Texas, with companies given credit for selling wind policies in coastal areas.