SOURCE: Independent Insurance Agents of Texas (IIAT)

January 30, 2007 13:00 ET

Statewide Study Shows Texas Economy at Risk

Effects of Katrina-Force Hurricane Would Be Catastrophic for Entire State Economy, Not Only Gulf Coast; Texas Legislature Must Re-Structure Texas Windstorm Insurance Association

AUSTIN, TX -- (MARKET WIRE) -- January 30, 2007 -- The Independent Insurance Agents of Texas (IIAT) today announced the results of a statewide study detailing the interdependency of the Texas economy region-by-region, showing how crucial the Gulf Coast is to the state's economic health.

"This is the first study of its kind that clearly demonstrates the interdependent economic links between the coast and the rest of the state," Robert Hempkins, IIAT president, told a gathering of Texas media, legislators and independent insurance agents in announcing release of the study.

IIAT commissioned the study to accurately assess Gulf Coast contributions to the overall Texas economy. While few would dispute that the Texas Coast is a major player in the Texas economy, actual numbers were unknown prior to the study conducted by Nobel Prize nominated economist, Ray Perryman.

Texas Gov. Rick Perry commented, "This study by the Independent Insurance Agents of Texas demonstrates how important our coast is to the entire Texas economy."

Gov. Perry continued, "We must be prepared for the mega-storms predicted over the next several years, which could strike the Texas coast and threaten the safety and well-being of residents, commerce and industry -- not only on the coast, but also throughout Texas."

Titled "An Economy at Risk: Our Vulnerable Coast and Its Importance to the Texas Economy," the study documents the coastal region as an economic engine for the entire state. From diesel fuel for High Plains agriculture to jet fuel for Dallas-based airlines, regional economic success is directly linked to Gulf Coast industries, finds the study. The economic influence ranges from about 33 percent in the Upper Rio Grande Region to more than 56 percent in the Golden Crescent and Texoma regions.

David VanDelinder, IIAT executive director, pointed to several of the study's key findings. "This data and these facts can no longer be ignored," said VanDelinder.

"Although only a quarter of our state residents live in Gulf Coast counties, they produce more than 30 percent of our state's annual economic output. Even more important is the influence the coast has on the rest of the state. The IIAT study finds that 40 percent of Texas jobs are tied directly to production along the coast and 44 percent of the state's total income is linked to key Gulf Coast sectors.

"That's why the total economic impact of a major storm along our coast is estimated to be much greater than simply the property damage that would occur," said VanDelinder.

Speaking in support of the study's conclusion, Texas Sen. Troy Fraser (R-Horseshoe Bay) said all Texans need to be mindful of the lessons learned from Katrina. "It is time to put in place a mechanism for the proper funding to ensure recovery following a major storm."

The Texas Legislature has the opportunity and the incentive from lessons learned in Louisiana, Alabama and Florida to find a solution to the currently inadequate funding structure for the Texas Windstorm Insurance Association (TWIA). TWIA was created in 1971 to provide windstorm insurance in designated areas of the state for homeowners and business owners unable to obtain coverage from conventional sources in the voluntary insurance market.

Rep. John Smithee (R-Amarillo) said the IIAT study underscores the importance of finding a solution to the state's inadequate storm preparedness. "This issue is not limited to the coast. The entire state has a responsibility to share in the financial impact of a major storm."

"The study makes a powerful argument for ending the legislative delay in taking action to remedy inadequate state laws and repair the ailing financial structure of the Texas Windstorm Insurance Association," said Hempkins. IIAT's study provides the legislature the hard data necessary to begin the TWIA restructuring process and to encourage coverage from insurance companies.

Coastal and inland legislators understand the magnitude of the state's financial exposure should a Katrina-force hurricane strike. Rep. Craig Eiland (D-Galveston) commented, "We all knew a Katrina-sized storm could impact the state in enormously negative ways. And now we can see how serious the threat really is."

Rep. Larry Taylor (R-League City) and an independent insurance agent who is a member of IIAT, reminds legislators that losses of this magnitude have also placed enormous pressure on state general revenue funds in neighboring states. He questioned whether any Texans would want a similar fate for Texas.

All four lawmakers are committed to resolving the TWIA crisis and minimizing the human and economic devastation that a Katrina-force hurricane could cause in Texas. Furthermore, they all served on the Joint Select Committee on Windstorm Coverage and Budgetary Impact. Rep. Smithee was co-chair of that committee established to study the use of rating methodologies in determining windstorm rate adequacy in coastal counties. The committee also examined ways to minimize the impact to the state's general revenue fund in the event of a catastrophe.

IIAT director of Governmental Affairs Lee Loftis reminded the group at the Capitol that although Texas experienced no threat from a major storm in 2006, hurricane experts are still predicting storm seasons that are more active and devastating than before. "Texas is the third largest insurance market in the country. We have the resources to avoid the financial ruin experienced by our neighbors. It is time to act," Loftis said.

The study results can be found online at www.iiat.org > Press Center.

About the Independent Insurance Agents of Texas

The Independent Insurance Agents of Texas (IIAT) is the nation's largest state association of independent insurance agencies, representing nearly 1,800 agencies and more than 15,000 agents and insurance professionals. Independent agents represent multiple insurance companies; they are not employees of any single insurance company. With an independent agent, consumers are able to comparison shop for cost effective and customized coverage. IIAT is affiliated with the Independent Insurance Agents & Brokers of America. Online at www.iiat.org.

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