Texas insurer of last resort sees market strain, ups reinsurance cover

The Texas Windstorm Insurance Association (TWIA), the Texas homeowner insurer of last resort, increased its reinsurance coverage by 7% to $2.036 billion for the coming fiscal year as part of its $4.24 billion funding programme designed to cover its 1:100 probable maximum loss (PML) in its entirety.

The programme for the  TWIA will include $936 million in traditional insurance with a one-year term, up from $830 million in the prior year programme. That facility provides cover on an aggregate basis for multiple events.

It also used cat bonds to complement the programme, including a smallish $200 million in newly issued bonds from Alamo Re replacing a $200 million 3Y bond from 2019 which has since matured. Two other series of previously issued and larger Alamo Re bonds remain in play: $400 million from 2020 and $500 million from 2021.

The remainder of the group's funding structure consists of intertwining layers of member assessments and public securities.

Policy counts and rate needs may point to market strain. The increase in reinsurance coverage follows the first rise in the policy-in-force count since 2014, a 4.8% increase to 195k policies “suggesting that private market coverage is again becoming more difficult to find.” Insured values have now hit $60.7 billion.

Rates are falling behind the curve.  TWIA's 2021 actuarial analysis found the Association’s rates to be inadequate by 39% for residential policies and 46.0% for commercial policies.  TWIA moved in August 2021 for a 5% increase in rates for 2022.

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