Texas Windstorm Insurer Sets Funding at $4.2 Billion for 2020 Cat Year

Article

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, 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 the expenditure of $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 it’s Dec.10, 2019, quarterly meeting, TWIA’s board voted to assess member insurance companies an additional $90 million for Harvey losses. Member insurers had previously been assessed $282 million due to Harvey losses. Most property insurers authorized to do business in Texas are required to be association members.

At the Dec. 10 meeting, the insurer also raised its ultimate loss estimate for Harvey to $1.7 billion from a previous estimate of $1.61 billion.

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.