Texas insurer of last resort TWIA could up reinsurance cover by 24%

The Texas state insurer of last resort, the  Texas Windstorm Insurance Association (TWIA), may seek as much as a 24% increase in reinsurance cover to $5.24 billion via its cat bond and mid-year renewal programme, early indications from the group's renewal planning suggest.

The TWIA's actuarial and underwriting committee put the group's likely 1:100 probable maximum loss at the $5.24 billion mark, which, if approved by the management board, would become the minimum reinsurance purchase. TWIA has previously arranged its buying to meet the statutory minimum.

One year prior, the board set its 1:100 PML at $4.236 billion and set its sights on a reinsurance and cat bond programme for the 2022‐2023 contract year to hit the target with $2.036 billion excess of $2.2 billion. The programme included $936 million in traditional multiple-event aggregate cover plus existing and new ILS issuance.

TWIA’s exposures rose 27% year on year to $82.87 billion, materials from the committee meeting show.

The TWIA actuarial committee worked from an array of cat models from four modelling agencies, then chose to build its recommendation on the average of long-term projections from Verisk’s AIR and RMS. The prior-year recommendation had been built on a four-way split of near-term and long-term models which, in the current year, would have rendered a higher PML, materials to the meeting suggested.

TWIA is moving at an accelerated pace in 2023 on warning from its broker Gallagher Re that the reinsurance market looks tight. TWIA agreed also to move early on cat bond issuance from unit Alamo Re. Some $400 million in Alamo Re cat bonds are set to mature in early 2023.

The TWIA board is slated to review the recommendation and issue its purchase orders at a meeting slated for January 19.

Texas law requires that TWIA assess its member carriers for any reinsurance purchases it makes beyond the 1:100 statutory minimum.

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