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The Texas Windstorm Insurance Associated (TWIA) board of directors voted Thursday to authorize broker Gallagher Re to pursue $2.92 billion in reinsurance for the 2023 storm season.

The TWIA board also voted to establish $4.5 billion as the 1:100 probable maximum loss for this year’s storm season.

The reinsurance in addition to TWIA’s $2.28 billion in statutory funding will give the association $5.2 billion in total funding 2023, enough to satisfy the association’s statutory funding obligations.

TWIA’s reinsurance for 2023 may consist of traditional reinsurance and catastrophe bonds and will include $700 million in existing multi-year catastrophe bonds. Because the cost of reinsurance is more than its PML, TWIA will assess the cost of the additional $700 million in reinsurance on Texas property and casualty insurance companies. P&C insurers are required by state law to pay the assessment.

In voting to establish the PML of $4.5 billion, the TWIA board decided to set a lower PML than what the association’s actuarial and underwriting committee recommended while divvying the cost of reinsurance onto insurers.

The committee determined the PML of $5.244 billion, a $1 billion increase from 2022 driven by the insolvencies of FedNat Insurance (Maison) and Weston Property & Casualty.

The actuarial and underwriting committee established a PML based on catastrophe model results presented by Aon, TWIA’s catastrophe modeling vendor. The committee used model results based on long-term assumptions and included loss adjustment expenses in determining the PML.

The TWIA board used the actuarial and underwriting committee’s PML figure to establish total reinsurance costs of $5.2 billion, putting $700 million in reinsurance costs on the tab of insurers.

“We’re trying to keep rates at a reasonable level. We’re trying to spread this out to where all the burden of it is not on the back of the policyholder,” said board chair Chandra Franklin Womack. “A lot of these insurance companies, they aren’t picking up any policies in the wind zone. They’ve got to share some of this if they’re going to write in this state.”

Board member Michael Gerick, who represents the insurance industry, warned that passing along the cost of reinsurance onto insurance companies will burden policyholders across the state.

“You’re going to ask the rest of the companies to possibly raise rates to pay for reinsurance for TWIA,” said Gerick. “I don’t think that’s going to be well received. Policyholders are already paying for this, because companies are buying reinsurance to pay for potential assessments. That is loaded in their rates statewide.”

The board voted 4-3 in favor of the funding package, with Gerick, Karen Guard, and Tony Schrader as the dissenting votes.


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