The wind and hail insurance carrier of last resort for counties along the Texas coast has determined that its 1-in-100 probable maximum loss (1:100 PML) for the 2020 catastrophe year is $4.2 billion.
At a quarterly meeting in Austin on Feb. 18, 2020, the board of the Texas Windstorm Insurance Association directed staff to bring the association’s 2020 catastrophe funding up to the $4.2 billion mark through a combination of catastrophe bonds and traditional reinsurance. Together, the cat bonds and reinsurance would total $2.1 billion, the association reported.
As authorized by the board, TWIA will also ask the state insurance commissioner to approve spending $45 million of the association’s 2019 net earnings to partially redeem the Series 2014 bonds used for paying Hurricane Harvey losses.
Hurricane Harvey struck the Texas coast in late August 2017. At its Dec. 10, 2019, quarterly meeting, the TWIA raised its ultimate loss estimate for Harvey to $1.7 billion from a previous estimate of $1.61 billion.
TWIA’s board at the December meeting voted to assess member insurance companies an additional $90 million for Harvey losses. Member insurers had previously been assessed $282 million for Harvey losses. Most property insurers authorized to do business in Texas are required to be association members.
Prior to the December 2019 quarterly meeting, staff had recommended a 5% increase in rates for both residential and commercial properties. That recommendation received intense negative feedback from policyholders, coastal legislators, governmental boards and businesses along the Gulf Coast.
In July 2019, TWIA published its 2019 Rate Adequacy Analysis that indicated its rates were inadequate by as much as 42%. But the board declined to vote on a rate increase in December. It also did not take up the issue of rates at the Feb. 18 meeting. TWIA has said it will defer consideration of rates until the next statutorily required rate filing in August 2020.
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