NU Online News Service, March 1, 10:14 a.m. EST
The Texas Department of Insurance (TDI) said that allowing the Texas Windstorm Insurance Association (TWIA) to continue operating would be hazardous to the public and the last resort insurer's policyholders.
TDI has placed TWIA under administrative oversight, a decision TDI said is based on information provided to it that suggests an outside claims adjuster was paid for work that was never done. TWIA paid claims based on this adjuster's recommendations and failed to report the suspected fraud to TDI when it became aware of the situation, Insurance Commissioner Mike Geeslin noted in a letter to Jim Oliver, general manager of TWIA.
The commissioner's office said TWIA has not addressed issues found during a recent financial examination that points to "a lack of adequate controls over accounting, personnel and material decisions affecting day-to-day operations."
TWIA must adhere to several requirements to lift the administrative oversight and allow TDI access to any books, records or other TWIA information, Mr. Geeslin's letter states. TWIA must run all senior or executive appointments by TDI for approval, submit expenditures to TDI for approval. and TWIA must develop a plan to improve communication with its board, according to the letter.
TWIA has faced scrutiny over its claims handling since Hurricanes Ike and Dolly in 2008. The storms wiped out the cash TWIA had on hand and depleted the state catastrophe reserve fund. At the very end of the 2009 legislative session, lawmakers passed a new funding structure for the state's insurer of coastal homes that might otherwise go uninsured.
Insurers and TWIA are still getting claims from Hurricane Ike. Losses from the storm for TWIA were at $1.85 billion at the start of the year and were expected to grow. The association has received 92,800 claims from Ike and it was sued 4,800 times. More than 2,500 lawsuits have been settled.
Recently lawmakers grilled TWIA about severance packages, worth a total of $160,000, given to two executives.
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