TWIA budgets for $1.88bn of reinsurance in 2020, at higher rates

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The Texas Windstorm Insurance Association (TWIA) is budgeting that it will require $1.88 billion of reinsurance limit in 2020, which will be split across its traditional property catastrophe reinsurance and catastrophe bond, but at higher rates as the insurer anticipates paying more for its 2020 renewal.

TWIA logoThis year, TWIA secured a $2.1 billion reinsurance and catastrophe bond program for the 2019 hurricane season.

TWIA’s $2.1 billion of reinsurance and risk transfer was made up of $400 million of Alamo Re Ltd. (Series 2017-1) catastrophe bonds, $400 million of Alamo Re Ltd. (Series 2018-1) catastrophe bonds, $200 million from the recently issued Alamo Re Ltd. (Series 2019-1) cat bond deal, as well as $1.1 billion of traditional reinsurance coverage, in 2019.

The organisation is aware of the firming conditions in the reinsurance market, having paid $90.2 million for its reinsurance program in 2019, but now budgeting for $93.1 million of reinsurance costs in 2020.

TWIA expects that it will renew and secure its 2020 reinsurance and cat bonds to sit on top of a $2.2 billion attachment point, which is slightly higher than 2019’s $2.1 billion attachment.

The reason for the higher attachment and the slightly smaller reinsurance limit required, is that TWIA is in a better financial position, having less exposure in its portfolio and more funding in the Catastrophe Reserve Trust Fund (CRTF).

But still ceded premium is expected to increase, due to an assumed increase of around 15% in the rate on line (premium/limit) from 4.3% to 4.95% for the overall program, TWIA said yesterday.

TWIA’s $400 million Alamo Re 2017 catastrophe bond is scheduled for maturity in May 2020, so in advance of the hurricane season, meaning there is a good chance the insurer will return to the cat bond market to at least renew this capital market backed cover next year.

TWIA tends to buy a mix of protection, with the capital markets playing a key role at around 40% to 60% of the reinsurance program each year.

The insurer also announced yesterday that its ultimate loss from 2017’s hurricane Harvey has crept higher again, reaching $1.7 billion at this stage (still below the reinsurance program).

Because of this, TWIA’s board voted yesterday to assess member insurance companies another $90 million for Harvey claims, taking the total assessment levied to $372 million.

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