Projection for 2013 Hurricane Season – Claims Potential vs. TWIA Funding
We are going into the 2013 hurricane season with $1.8 billion in claims funding capability from TWIA (Texas Windstorm Insurance Association) as follows:
1. TWIA Cash on-hand – $100 million – assumes no large storm losses prior to 6/1/2013
2. CRTF (Catastrophic Reserve Trust Fund) – $205 million
3. Class 1 post-event bonds – not marketable per TPFA (Texas Public Finance Authority) analysis
4. Class 2 post-event bonds – $1 billion*
5. Class 3 post-event bonds – $500 million**
6. Reinsurance – no current funds available to purchase
*The TWIA PIR attached indicates that if the class 1 bonds are not sold, then half of the class 2 bond repayment would be dependent on TWIA to repay (i.e., future revenue stream). This could also impact the marketability of the class 2 bonds.
** It is unclear to me if the Class 3 bonds could be issued without the Class 2 bonds being fully executed.
This outcome is well below TWIA’s probable maximum loss risks. From TWIA provided data, the 75 percentile modeled storm results is $6.6 billion for Galveston and $5.5 billion for Corpus Christi from a Category 4 hurricane strike as of April 2012. By June 1, 2013, continued growth in number of policies will increase these risk by several hundred million.
It continues to be my contention that TWIA is an insecure insurance entity without the ability to fund claims up to the expected losses from a category 4 hurricane strike on either of our two main coastal economic concentrations (Galveston or Corpus Christi). For reference, the claims from hurricane Ike and Dolly in 2008 to TWIA were initially $2.3 billion (but they have paid out more since 2008 due to ongoing litigation). This is an unacceptable situation for our coastal residents who depend on their TWIA insurance contracts to pay their claims and is an unacceptable economic risks for the coastal communities, the TWIA service area (the entire Texas coast) and the overall Texas economy.
Projection for 2013 Hurricane Season – Claims Potential vs. TWIA Funding
We are going into the 2013 hurricane season with $1.8 billion in claims funding capability from TWIA (Texas Windstorm Insurance Association) as follows:
1. TWIA Cash on-hand – $100 million – assumes no large storm losses prior to 6/1/2013
2. CRTF (Catastrophic Reserve Trust Fund) – $205 million
3. Class 1 post-event bonds – not marketable per TPFA (Texas Public Finance Authority) analysis
4. Class 2 post-event bonds – $1 billion*
5. Class 3 post-event bonds – $500 million**
6. Reinsurance – no current funds available to purchase
*The TWIA PIR attached indicates that if the class 1 bonds are not sold, then half of the class 2 bond repayment would be dependent on TWIA to repay (i.e., future revenue stream). This could also impact the marketability of the class 2 bonds.
** It is unclear to me if the Class 3 bonds could be issued without the Class 2 bonds being fully executed.
This outcome is well below TWIA’s probable maximum loss risks. From TWIA provided data, the 75 percentile modeled storm results is $6.6 billion for Galveston and $5.5 billion for Corpus Christi from a Category 4 hurricane strike as of April 2012. By June 1, 2013, continued growth in number of policies will increase these risk by several hundred million.
It continues to be my contention that TWIA is an insecure insurance entity without the ability to fund claims up to the expected losses from a category 4 hurricane strike on either of our two main coastal economic concentrations (Galveston or Corpus Christi). For reference, the claims from hurricane Ike and Dolly in 2008 to TWIA were initially $2.3 billion (but they have paid out more since 2008 due to ongoing litigation). This is an unacceptable situation for our coastal residents who depend on their TWIA insurance contracts to pay their claims and is an unacceptable economic risks for the coastal communities, the TWIA service area (the entire Texas coast) and the overall Texas economy.