At today’s Board meeting, staff at the Texas Windstorm Insurance Association (TWIA) approved the 2025 budget, which includes $485 million of ceded premiums, up on 2024’s $397 million, amid continued exposure growth and a subsequent lift in its projected 1-in-100 year probable maximum loss (PML).
As we wrote previously, TWIA projected in November that it may need almost $5.8 billion in reinsurance limit for 2025 as 20% exposure growth increases its projected PML to a huge $7.8 billion.
At this time, TWIA estimated gross reinsurance premium of $485 million in order to secure this level of protection, which represents a 22% increase on the $397 million cost of its reinsurance program for 2024, which itself is some $99 million above the 2024 budgeted amount of $298 million.
Today, at the December TWIA Board meeting, the $485 million figure was approved within TWIA’s budget for 2025, which suggests it could look to secure the roughly $5.8 billion in reinsurance it projected it may need for next year amid the aforementioned rise in exposure and the PML.
For 2024, TWIA board approved the 1-in-100 year PML at $6.5 billion, which saw the insurer of last resort purchase $4.05 billion of reinsurance, comprised of $1.95 billion of traditional reinsurance and $2.1 billion of catastrophe bond protection.
This year’s risk transfer program included a CRTF balance of $450 million, which attaches below the reinsurance, but it was confirmed today that this is all expected to be depleted by the impacts of Hurricane Beryl, which, as of September 30th, 2024, led to direct losses and loss adjustment expenses of $455 million for TWIA.
“Given the continued growth in TWIA exposures and the depletion of the Catastrophe Reserve Trust Fund as a result of Hurricane Beryl, staff projects that significant additional reinsurance may be necessary for 2025,” said James Murphy, Chief Actuary, Vice President – Enterprise Analytics, TWIA, in a memorandum dated November 20th.
“Staff will work with our catastrophe modeling vender, Aon, to run the catastrophe models using exposures as of November 30, 2024 to allow the Board of Directors to make its determination of the 100‐year probable maximum loss (PML) early next year,” he continued.
In terms of timing, it was confirmed during today’s meeting that TWIA will decide on its reinsurance needs for 2025 in February, as it did this year, after the PML is determined and approved given exposure growth throughout this year.
