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TWIA raises 2020 reinsurance target to $2.1 billion

19th February 2020 - Author: Luke Gallin

The Texas Windstorm Insurance Association (TWIA) has increased its target amount of reinsurance protection for the 2020 catastrophe year to $2.1 billion, with the Board directing TWIA staff to place a mix of traditional reinsurance and catastrophe bond protection.

TWIAIn December of last year, TWIA said that it expects to purchase an aggregate amount of reinsurance protection of $1.88 billion for 2020, based on an attachment point of $2.2 billion and at an expected cost of a little over $93 million.

As well as the decline in the amount of combined catastrophe bond and traditional reinsurance protection, TWIA said that it expected to achieve a rate-on-line for the overall 2020 reinsurance program of between 4.3% and 4.95%.

Now, after some months and following a presentation by TWIA’s reinsurance broker, Guy Carpenter, the TWIA Board has determined that in order for TWIA to be covered for losses up to a 1-in-100 probable maximum loss hurricane event for the year, the residual insurer requires $4.2 billion of coverage, including loss adjustment expenses.

In order to bring its funding level up to the requirement, the Board has directed TWIA staff to place a combination of cat bond and traditional reinsurance in an aggregate amount totalling $2.1 billion. However, while the limit required has increased, the expected rate-on-line for the 2020 program has now declined from that expected in December, to a range of 4.25% to 4.5%.

The organisation still expects that its reinsurance costs will be around $93 million for the 2020 program, while the attachment point is set at around $2.1 billion.

Currently, TWIA has three catastrophe bond transactions outstanding, with the 2019 program including its $400 million Alamo Re Ltd. (Series 2017-1) deal, the $400 million Alamo Re Ltd. (Series 2018-1) transaction, and the more recent $200 million Alamo Re Ltd. (Series 2019-1) catastrophe bond transaction.

For the 2020 program, our sister site Artemis’ comprehensive insurance-linked securities (ILS) and catastrophe bond Deal Directory, shows that the 2017 deal is scheduled to mature in May of this year, suggesting that TWIA will be back in the capital markets for another slice of reinsurance protection in the near future.

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