Real Estate

WSJ: Coastal Texas towns weigh pros and cons of mandatory storm proofing

Some considering implementing building requirements to bring insurers back

In the wake of recent storms, in the face of reluctant insurers and in the absence of a state-wide building code, some Texas towns are mulling over the costs and benefits of implementing storm resistant building requirements, according to an article in the Wall Street Journal.

The efforts center around a three-tiered set of building codes dubbed “Fortified.” The Fortified program was developed by the Insurance Institute for Business and Home Safety, a research institute funded by the insurance industry. Risk consultants say that implementing the Fortified standards would make these coastal cities viable for insurers.

“If you’re not mitigating risk, you’re not going to have a healthy market,” Jeffrey Czajkowski, managing director of the Wharton Risk Management and Decision Processes Center at the University of Pennsylvania told the Wall Street Journal.

One of the chief goals of implementing Fortified is to give homeowners options when selecting insurance. After 2005, most private insurers left these coastal Texas towns and homeowners were left with one option, the Texas Windstorm Insurance Association. TWIA is the insurer of last resort for Texans, the article explained.

However, others feel that implementing stringent building standards will put too much of a financial burden on homeowners. The article indicates that the price increase on building due to Fortified regulations is 1% to 3%. That said, construction prices are high and on the rise.

Right now, there are 8,200 Fortified homes in the U.S. Of those, about 7,000 are in Alabama where homeowners can get mandatory discounts up to 55% from insurers if their homes comply with Fortified standards.

So far, Texas municipalities are toeing the water with Fortified regulations. Most have not adopted it wholesale as they wait to see how their residents receive the idea.

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