Texas’ wind and hail insurer of last resort for properties in the state’s coastal counties has determined it needs $4.03 billion in funding to prepare for this year’s hurricane season.
The board of directors of the Texas Windstorm Insurance Association voted on March 23 to establish the probable maximum loss of $4.03 billion for a hurricane season with a probability of one in 100 (1:100 Probable Maximum Loss) in advance of the 2021 season.
TWIA staff has been directed to place a combination of catastrophe bonds and traditional reinsurance in an aggregate amount totaling $1.9 billion (in excess of $2.1 billion in statutory funding) to bring the season’s catastrophe funding to $4.03 billion.
The board voted to direct the TWIA’s reinsurance broker to provide the board with pricing information on a purchase of an additional $1 billion in reinsurance to bring the association’s total funding for the 2021 storm season to $5 billion. Statute requires that any additional reinsurance purchased to bring the association’s funding above the 1:100 Probable Maximum Loss be paid for through assessments of the association’s member companies.
The board declined to take any action on rates at its March 23 meeting, despite the rejection by the Texas Department of Insurance in January of TWIA’s December 2020 filing for a 5% rate increase. In its rejection letter, TDI stated that under the Texas Insurance Code, TWIA should have made the rate adequacy analysis performed by Willis Towers Watson (WTW) and presented to the board at the meeting available to the public on its website for 14 days before the rate filing vote.
WTW found TWIA rates to be inadequate by 26 percent for residential policies and 44 percent for commercial policies. TDI viewed the WTW analysis to be part of the association’s rate analysis.
TWIA staff has been directed schedule a public workshop meeting of the board, members of the actuarial and underwriting committee, and the association’s reinsurance broker to further study rate issues. No action on a rate filing will be taken at the workshop meeting but the board may direct staff to gather additional information for board consideration and action at a later time.
An archived recording of the board’s March 23 meeting will be available on TWIA’s website at www.twia.org/about-us/board-of-directors/archived-meetings.
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