The Texas Windstorm Insurance Association (TWIA) has been advised by its reinsurance broker to begin the planning and purchase of its reinsurance as soon as possible, with the state’s insurer of last resort potentially needing to buy more than $3 billion in limit for 2024 as exposure growth continues and inflation persists.
Back in November, TWIA, the Texas wind and hail insurer of last resort, said that it’s expecting annual exposure growth of more than 28% in total insured value through 2024, leading to the insurer needing to buy more limit at its next renewal.
While both the figures and budget have not yet been set, estimated projections point to as much as $3.3 billion being needed for 2024, based on a higher 1-in-100 year PML due to exposure growth and model changes.
Exposure growth at the firm has continued, with the policy count rising alongside elevated exposure and rising property values, which is being driven by the current inflationary landscape.
The expected rise in reinsurance and risk transfer limit needed for the 2024 wind season is significant when compared with 2023, when the insurer secured around $2.4 billion of limit, across both traditional reinsurance and catastrophe bonds.
The 2023 program consisted of $1.043 billion of traditional reinsurance, and $1.2 billion of catastrophe bond protection. Of the $1.2 billion of cat bond protection currently outstanding, $500 million is scheduled to mature ahead of the 2024 wind season, meaning that just $700 million of cat bonds will be in-force.
As a result, our insurance-linked securities (ILS) focused sister publication, Artemis, has reported that TWIA is pondering entering the cat bond market early.
It’s understood that the Texas insurer of last resort has been working closely with Gallagher Re, its reinsurance broker, and its ILS focused investment banking arm, Gallagher Securities, to come up with a plan for approaching the reinsurance and cat bond market for 2024.
The hard reinsurance market environment is expected to persist next year and combined with the $500 million in cat bond maturity and growth in exposure and subsequent expansion in TWIA’s reinsurance program, Gallagher Re has reportedly advised TWIA to commence its reinsurance planning and purchasing as soon as possible.
