TWIA forecasts $2.05bn reinsurance / cat bond need for 2027, proposes 18% budget reduction

The Texas Windstorm Insurance Association (TWIA) is projecting it will need to secure around $2.05 billion of reinsurance and catastrophe bonds for 2027, as it expects to require approximately 10% less protection than this year largely thanks to a building up of its Catastrophe Reserve Trust Fund.

At the mid-year 2026 renewals TWIA secured roughly $2.28 billion of risk transfer and reinsurance, with the catastrophe bond market supplying $1.05 billion of that limit for the current contract year.

That was a significant decline from the $4.227 billion of reinsurance and cat bonds that TWIA had in-force in 2025, after the Board opted to buy protection up to the 1-in-50 year level (rather than the 100 year) given new legislature that was in place at the time.

That 1-in-50 year probable maximum loss funding level remains the target for 2027 and the TWIA Board recently rejected a proposal to revert back to buying to the 100 year and apply assessments to fund part of that cost.

As a result, the 1-in-50 year minimum required funding level for 2027 is currently projected to be $4.4 billion, slightly up on last year’s $4.3051 billion.

But TWIA’s Catastrophe Reserve Trust Fund (CRTF) is now projected to grow from 2026’s $25 million to as much as $350 million in time for the 2027 reinsurance renewals, which means less new limit is likely to be required.

TWIA projects it will still have $2 billion of statutory funding available next year, so on that basis the current projection for total reinsurance and catastrophe bond limit risk transfer that will be needed in 2027 stands at $2.05 billion, which is a just over 10% decrease.

On that basis and also given the effects of softened reinsurance and cat bond pricing, TWIA’s staff now forecast that the risk transfer budget for 2027 could be around $173 million, which is nearly an 18% decrease from 2026’s almost $210 million.

That budget is being presented to the TWIA Board this week and is based on forecasted exposures, the expected attachment point of the protection (which currently would seem to be around $2.35 billion depending on CRTF available, up from a $2.025bn attachment this year), as well as market conditions for reinsurance and cat bond purchases.

A slight increase in exposures is anticipated by the end of 2027, but this is only anticipated to be just under 4% since the last actual figure at the end of 2025 by that time, while exposure growth over the course of calendar year 2026 is only projected to be 2.6% from the end of 2025.

TWIA currently has total cat bond risk transfer of $1.05 billion, according to the Artemis cat bond sponsor leaderboard, after the insurer of last resort redeemed a meaningful amount of cat bond protection early in 2026.

Currently, all of that catastrophe bond protection will remain in-force through until scheduled maturities in 2028 for TWIA.

So if the insurer opts to maintain its current outstanding cat bond coverage, that could reduce the amount needed to purchase afresh in 2027 to just $1 billion, split across new reinsurance and cat bonds (it’s worth noting we’re not certain whether any traditional reinsurance has multi-year terms for TWIA this year).

The proposed budget shows that the Texas Windstorm Insurance Association (TWIA) staff expect the insurer to be on stronger footing in 2027, while the softened market pricing is also currently projected to benefit its purchases and renewals next year.

Catastrophe bonds are likely to remain a significant component of the 2027 reinsurance and funding tower for TWIA, as the insurer has demonstrated its liking for the predictability and certainty that provides, as well as the flexibility variable reset conditions afford it in its risk transfer planning.

TWIA has been directly sponsoring catastrophe bonds since 2014 and you can read about every one in our Deal Directory.