Reinsurance Regulation

The Texas legislature created the Texas Windstorm Insurance Association (“the Association”) as a means of providing property insurance to homeowners in certain areas at elevated risk of hurricane damage. The Association’s membership consists of all property insurers authorized to do business by Texas’ department of insurance. The Association is run by a board of directors made up of member representatives nominated to the board by the office of public insurance counsel, and the Association’s board in turn reports to the Texas commissioner of insurance. Notably, the Court listed some of the powers of the board, as set forth in its plan of operation appearing in the Texas Administrative Code, which powers include “assuming reinsurance from and ceding reinsurance to members, and purchasing reinsurance on behalf of members” (though the Association’s reinsurance rights and obligations were not at issue).

The Association became engaged in an appraisal dispute with homeowners to whom it issued a policy, and whose property was damaged by Hurricane Rita. In seeking to clarify its obligations under the policy, the Association filed a petition for declaratory relief in state court. The homeowners challenged the Association’s capacity to sue, asserting that the power to sue was not enumerated among the enumerated powers in the governing statutes and regulations. The Court rejected that argument, finding that, inherent in the Association’s general power to “perform all other duties reasonably necessary to accomplish the purpose” of its authorizing statute, was the power to seek resolution of inevitable disputes in Texas’ courts. Texas Windstorm Insurance Association v. Poole, No. 07-07-0061-CV (Tex. App. 7th Dist. 2008).

This post written by John Pitblado.