Reinsurance News

TWIA secures $1.93b reinsurance tower for 2021, doubles cat bond size

3rd June 2021 - Author: Matt Sheehan

The Texas Windstorm Insurance Association (TWIA) has released the details of its full catastrophe reinsurance program for the 2021 hurricane season, which consists of a $1.93 billion program tower, including $830 million of traditional reinsurance and $1.1 billion of coverage from catastrophe bonds.

Combined with its $2.1 billion in statutory funding, this takes TWIA’s aggregate funding sources for the 2021 season to $4.03 billion.

The Association could have sought an additional $1 billion of reinsurance for the program but confirmed last month that it had decided against this option.

But it’s now been confirmed that TWIA has doubled the size of its Alamo Re 2021-1 cat bond from $250 million to provide $500 million of three-year annual aggregate and indemnity triggered reinsurance protection, covering losses from named storms and severe thunderstorms in Texas.

Added to the existing $600 million of coverage provided by the Alamo Re II Pte. Ltd. (Series 2020-1) and Alamo Re Ltd. (Series 2019-1) bonds, this means that roughly 57% of TWIA’s reinsurance tower for 2021 is made up of cat bonds.

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The total $4.03 billion in catastrophe funding for the upcoming season should comfortably meet TWIA’s statutory funding requirement to respond to a 1-in-100-year storm season.

The traditional reinsurance program provides coverage on an aggregate basis, meaning multiple hurricane events would be covered under the same reinsurance program.

As it has for the last three years, TWIA has also secured a $500 million line of credit to provide immediate liquidity to pay claims, which would be repaid by any Class 1 public securities issued because of catastrophic losses.

Reinsurance costs for the 2020-2021 program (ceded earned premium) totaled $106.9 million and incepted on June 1 using a combination of traditional reinsurance and catastrophe bonds.

Additionally, the Association received $1.49 million in November from the Monetary Authority of Singapore for reimbursement of certain fees associated with the issuance of $400 million in cat bonds, which was recorded as a reduction in ceded written and ceded earned premium.

For 2020, TWIA secured $2.1 billion of protection across both traditional reinsurance and catastrophe bonds transactions, taking total aggregate funding to $4.2 billion for the season.

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