TWIA Anticipates Higher Reinsurance Spending in 2025

The Texas Windstorm Insurance Association expects to spend more on reinsurance in 2025 to account for projected policy count and exposure growth and losses to the association’s catastrophe reserve trust fund (CRTF) arising from Hurricane Beryl.

TWIA’s board of directors last week approved a budget line item of $485 million on ceded premiums for 2025, which includes a combination reinsurance and catastrophe bond spend. That represents a 22% increase TWIA’s reinsurance and cat bond spend in 2024.

The $485 million figure is a placeholder until TWIA determines its 1-in-100 year Probable Maximum Loss for the 2025 storm season at an upcoming February board meeting.

TWIA’s operating budget, which is independent of reinsurance spending, is expected to remain consistent in 2025 at $40.27 million.

TWIA staff will work with the association’s catastrophe model vendor, Aon, to make a determination on PML. TWIA and its reinsurance broker, Gallagher Re, will have until the start of hurricane season (June 1) to actually place reinsurance.

TWIA, the insurer of last resort for windstorm and hail coverage along the Texas coast, experienced $455 million in direct losses from Hurricane Beryl. The storm made landfall southwest of Houston on July 8 as a category 1 hurricane.

Severe convective storms from January through June and other non-hurricane losses totaled $172 million for the nine months ended September 30, 2024, TWIA said, more than double the $81.6 million budgeted through September 30.

TWIA depleted its CRTF to pay out Beryl losses. The association’s 2025 reinsurance spending will essentially make up that gap, a TWIA spokesperson said.

The CRTF is replenished in years when net premium is greater than losses paid out. The last time the trust fund was depleted was in 2017 following Hurricane Harvey. Between 2018 and 2024 TWIA had steadily built up its CRTF to about $460 million. After a big storm like Beryl, the fund goes back down to zero.

TWIA, meanwhile, has seen its policy count and exposure grow substantially over the last several years.

TWIA’s board of directors were told at a November meeting that policy count is expected to continue due to the ongoing contraction in coverage offered by the private market. Written premiums in 2025 are projected to be $779 million, while the number of policies in force is projected to increase to 285,000 at year-end 2025, an increase of 13,000 policies from 2024.