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The Board of the Texas Windstorm Insurance Association (TWIA) has today approved a $485 million budget line item for ceded reinsurance and catastrophe bond spend for 2025, which is up 22% on the $397 million spent on protection for 2024.
As we reported last month, the Texas Windstorm Insurance Association (TWIA) had projected it may need almost $5.8 billion of reinsurance and catastrophe bond limit for next year, a significant increase from the just over $4 billion in reinsurance limit it had secured for the 2024 wind season.
A year ago, TWIA started its progress towards funding for the 2024 storm season with an initial budget for reinsurance and cat bond protection of just $298 million.
After buying more reinsurance than initially projected and encountering a hard reinsurance marketplace, TWIA ended up spending the $397 million on its reinsurance and cat bond tower for 2024.
For 2025, TWIA will need to secure reinsurance lower-down, with its private market risk transfer funding needing to fill a hole caused by losses from hurricane Beryl, which rose to $455 million and almost completely eroded the Catastrophe Reserve Trust Fund (CRTF) that sits at the bottom of the storm funding tower.
In 2024, TWIA purchased $4.05 billion in reinsurance and cat bond coverage, but for 2025 the projection now is for a possible $5.795 billion to be required, which is a 43% increase.
At today’s TWIA Board meeting the 2025 budget was presented with the line item for ceded reinsurance costs indicated at $485 million.
The TWIA Board approved the budget for 2025, so now the staff of the Texas windstorm insurer will work with risk modellers from Aon and its reinsurance broker Gallagher Re to plan out a strategy and progress the necessary work to identify what reinsurance and catastrophe bonds may be needed for 2025.
With a need for almost $5.8 billion in reinsurance, up from the $4.05 billion in reinsurance and cat bond coverage that were in-force through this year, it implies both more traditional reinsurance and more catastrophe bonds may need to be secured.
For 2024, TWIA had in place $2.1 billion of Alamo Re catastrophe bonds, as well as some $1.95 billion of traditional reinsurance.
It appears more of both may be helpful for 2025, but it remains to be seen whether the full nearly $5.8 billion of funding can be secured from the reinsurance and cat bond market for the $485 million ceded reinsurance cost budget line, or whether the spend might need to increase like it did last year.
Conditions are more favourable in both reinsurance and the cat bond market, so it will be interesting to watch how TWIA’s program develops next year as it begins sourcing its protection for the 2025 windstorm season.
Read our article from November for more on the exposure growth and reinsurance need at TWIA: TWIA needs almost $5.8bn in reinsurance for 2025, as CRTF eroded by Beryl, PML rises.
TWIA has been directly sponsoring catastrophe bonds since 2014 and is one of the largest sponsors in our cat bond market sponsor leaderboard.
TWIA Board approves $485m ceded reinsurance budget for 2025, 22% up on 2024 spend was published by: www.Artemis.bm
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