Texas state insurer seeks $2.9bn reinsurance renewal, shields policyholders

The Texas insurer of last resort, the  Texas Windstorm Insurance Association (TWIA), moved to buy $2.92 billion in reinsurance coverage on the market at the pending renewal, but shielded policyholders from a portion of the sum.

The reinsurance funding comes above and beyond $2.28 billion in statutory funding, to bring TWIA’s total funding for the 2023 storm season to $5.2 billion.

That $5.2 billion sum will land above the statutory minimum as TWIA set its 1:100 probable maximum loss PML at $4.5 billion, thus pushing the cost of the extra $700 million onto member insurance companies.

A recommendation from TWIA's actuarial committee had been for a PML at the $5.2 billion mark based on a mix of longer-term model forecasts from Verisk’s AIR and RMS.

The board ultimately kept the PML down by basing strictly on the RMS model. One year prior, the TWIA had crafted a blend of four models.

The 2023 reinsurance programme may consist of traditional reinsurance and catastrophe bonds and will include $700 million in existing multi-year catastrophe bonds that will be available for the 2023 storm season.

The board was under some measure of political pressure to keep costs low.

State senator Mayes Middleton proposed the board accept the lowest possible POML amongst modelled inputs as reinsurance purchase "could dramatically raise people's rates," he told the board meeting, claiming reinsurance costs account for some 25% of policyholder premiums.

The Texas Coastal Windstorm Insurance Coalition had also chimed in to avoid major reinsurance costs.

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.

Did you get value from this story?  Sign up to our free daily newsletters and get stories like this sent straight to your inbox.