You know it’s bad when your boss tells you that you need to improve your job performance, but you know it’s really bad when your boss tells you that the way you do your job is unsustainable. And that’s exactly what Texas Insurance Commissioner Eleanor Kitzman said about the Texas Windstorm Insurance Association (TWIA).

Noting that TWIA’s share of the Texas market has grown to 57.2% in 2010 from 17.9% around 2000, Kitzman declared that a “fundamental restructuring of TWIA is necessary.” Kitzman intends to name a technical advisory committee to offer input on restructuring. The committee and consultant will both be chosen by April 1, and a preliminary report should be prepared by the June 1 start of the 2012 hurricane season.

Kitzman said that, “TWIA was supposed to be the market of last resort for the 14 coastal counties that comprise Tier 1, but that is not the case anymore.” Kitzman continued:

With no other significant source of funding to pay claims, this growth in exposure is an excessive burden on coastal citizens. Additionally, it is not reasonable to expect that any single organization can effectively manage the explosive growth in claims activity that occurs after a significant tropical storm. On July 1, 2008, TWIA had 247 open claims; 90 days and two storms later, it had over 65,000 claims and was simply overwhelmed.

The article notes that according to a November 2011 response to a public information request, TWIA admitted it faces a maximum loss outcome of $14.7 billion and probable maximum loss of $5.3 billion if a Category 4 hurricane strike Corpus Christi, and a probable maximum loss of $6.4 billion and maximum loss outcome of $14.5 billion for a similar storm striking Galveston. TWIA’s total insurance liability, including adjacent areas, is $15.4 billion for Corpus Christi and $37.9 billion for Galveston.

If you were one of the thousands of Texas coastal residents that had to file an insurance claim with TWIA following Hurricane Ike, you probably agree with Commissioner Kitzman’s conclusion that TWIA needs a major overhaul. However, change should not come at the expense of removing protections for policyholders. Otherwise, TWIA will have no incentive to act in good faith and we’ll find ourselves in a similar mess next time a major Hurricane makes its way through the Texas Gulf Coast. And no one wants to relive that again.