The Texas Windstorm Insurance Association (TWIA) has said that it expects its reinsurance costs to amount to $93.1 million in 2020, while the aggregate amount of cover purchased is expected to decline by more than 10%.
Reinsurance costs of $93.1 million in 2020 for TWIA’s catastrophe reinsurance programme is based on a projected attachment point of $2.2 billion and a total limit purchased of $1.88 billion, subject to the Board’s final determination.
This compares with a total spend of $90.2 million for TWIA’s 2019 placement, which, saw the residual market property insurer for the state of Texas secure $2.1 billion of private market reinsurance and catastrophe bond protection.
In a Board meeting held yesterday, TWIA explained that the aggregate reinsurance purchased for its renewal is projected to reduce from $2.1 billion to $1.88 billion as a result of declining exposure and an increase in the Catastrophe Reserve Trust Fund (CRTF). However, ceded premium is projected to increased based on an assumed increase in the rate on line for the overall programme, from 4.3% to 4.95%.
The fact TWIA is budgeting for higher reinsurance costs shows that the organisation is preparing for a continuation of firming market conditions in 2020. TWIA’s 2019 cat reinsurance programme included $1.1 billion of traditional market protection and $1 billion of third-party capital in the from of three catastrophe bond transactions.
The organisation expects to renew its 2020 reinsurance and catastrophe bonds to sit on top of a $2.2 billion attachment point, which is up on the $2.1 billion attachment point secured last year.
It was also announced yesterday that TWIA’s Board of Directors voted to assess member insurance companies $90 million based on losses from 2017’s hurricane Harvey, which is in addition to the $282 million already assessed. This additional assessment is a reflection of an increase in TWIA’s ultimate loss estimate for hurricane Harvey from $1.61 billion to $1.7 billion.
