Texas Regulators OK Reinsurance Plan for Wind Pool

Texas Insurance Commissioner Mike Geeslin has approved the Texas Windstorm Association’s request for increased reinsurance for the 2008 hurricane season.

TWIA, the state-backed “insurer of last resort”; for wind and hail for 14 counties along Texas’ Gulf Coast and for parts of Harris County, had proposed $1.5 billion in reinsurance for the windstorm pool, a half-billion dollars more than the $1 billion it bought for the 2007 hurricane season.

The $1.5 billion would come with a retention of $600 million. In a letter to Geeslin requesting the reinsurance increase, TWIA Executive Director James W. Oliver. Oliver said the “increase is based on the substantial increase in TWIA’s probable maximum loss (PML) because of significant growth during 2007.”

“The first layer of the reinsurance program provides $500 million in coverage of losses in excess of $600 million,” according to the commissioner’s order approving the request. “The second layer provides $500 million in coverage of losses in excess of $1.1 billion, and the third layer provides $500 million in coverage of losses in excess of $1.6 billion.”

The estimated cost of the reinsurance program is $184.125 million or about 49 percent of TWIA’s estimated direct written premium for 2008, the order stated.

In total, TWIA’s direct and indirect exposure to loss is more than $65 billion.

“The commissioner’s decision will provide TWIA and their customers with additional layers of financial protection and help avoid a significant drain on the State’s General Revenue Fund in the event of a major hurricane,” stated Jerry Johns, president of the Southwestern Insurance Information Service.

Topics Texas Reinsurance Oklahoma