TWIA Expects $4.9B in Funds for 2016 Hurricane Season

While reinsurance for the 2016 hurricane season hasn’t yet been nailed down, Texas’ insurer of last resort for wind and hail along the Texas coast expects to have around $4.9 billion in funds available for paying claims.

The Texas Windstorm Insurance Association (TWIA) says that’s enough funding to pay for claims stemming from more than 99 percent of all modeled hurricane seasons, or a 100-year season.

In a media briefing issued by the association in mid-May, TWIA broke down the expected funding for the current hurricane year using a structure created in Senate Bill 900, which took effect on Sept. 1, 2015.

Under SB 900, claims first would be paid from earned premium and the catastrophe reserve trust fund (CRTF).

Funds for TWIA claims for 2016 will be sourced as follows (in descending order):

• $700 million in premium and CRTF
• $500 million in class 1 public securities
• $500 million in class 1 member assessments
• $250 million in public securities
• $250 million in class 2 member assessments
• $250 million in class 3 public securities
• $250 million in class 3 member assessments
• $2.2 billion reinsurance program, including catastrophe bonds.

TWIA secured catastrophe bond reinsurance from Alamo Re in 2014 and 2015. It will reimburse TWIA for $1.1 billion in actual, aggregate losses from one or multiple catastrophic events in a year. The bond structure adjusts each year through 2018 to accommodate changes in available funding. Alamo Re is a special purpose reinsurer that only insures specific losses for TWIA. In the absence of loss, any proceeds from the bonds are returned to investors at the end of the bond terms.

As of May 20, TWIA had not finalized its reinsurance for 2016, according to Jennifer Armstrong, the group’s vice president for Communications and Legislative Affairs.

Exposures

The insurer writes wind and hail policies in 14 coastal counties and in parts of Harris County; there were 268,832 policies in-force as of March 31. Insured building and contents coverage totaled $77.9 billion, and 6,691 insurance agents were registered to work with the association.

Other statistics include:

• 255,021 residential structures insured for an average amount of $191,000.
• 98.2 percent of residential structures have limits less than $500,000; 444 residential structures (.02 percent) have limits greater than $1 million.
• 19,513 non-residential (commercial and governmental) structures insured for an average amount of $456,000.
• 1,890, or 9.7 percent, of non-residential structures have limits greater than $1 million.