The Texas Windstorm Insurance Association, the insurer of last resort who provide windstorm and hail insurance to Gulf Coast property owners who might otherwise be left uninsured, have topped up their coverage by purchasing $636m of reinsurance from the private market.
The $636m of reinsurance provides them with cover for losses that exceed the $1.6 billion of funds which is estimated to be available from the association’s Catastrophe Reserve Trust Fund and bonds.
The reinsurance cover cost the TWIA just less than $100m and the policy is in effect from the 1st June 2011 to 31st May 2012. TWIA purchased the reinsurance from 47 reinsurance companies worldwide. Guy Carpenter brokered the reinsurance deal for the TWIA.
The purchase of reinsurance goes part of the way to satisfy parties who have been calling for the TWIA to shore up its coverage. Recently the Heartland Institute called for the TWIA to make use the private risk transfer markets (including suggestions of catastrophe bonds) to ensure it had sufficient cover to pay claims from two back-to-back hurricane events. At the time they suggested that the TWIA really needed as much as $8 billion in cover, so the association is still some way off being prepared for major storms.
Hurricane Ike, which struck Texas in 2008 are said to have amounted to over $1.85 billion and still claims from that event continue to be settled. That suggests that the $2.2 billion of cover that the TWIA now has is still nowhere near sufficient should a really large hurricane (or more than one) strike Texas during this hurricane season.