Partly reflecting an increase in policyholders and exposure, a committee of the Texas Windstorm Insurance Association is recommending a $2 billion increase in catastrophe funding for the 2023 storm season.
TWIA’s Actuarial and Underwriting Committee unanimously voted to recommend the TWIA Board of Directors establish $6.5 billion as TWIA’s 1:100 probable maximum loss for the 2024 storm season.
The 1:100 PML specifies the minimum amount of reinsurance needed to meet TWIA’s statutory funding obligations. Along with other sources, the PML helps determine how much reinsurance TWIA needs to purchase.
The $6.5 billion funding level is $2 billion more than TWIA secured in 2023, but it comes as the agency over the past year has added more than 25,000 policies and has seen the total insured value of the properties it covers increase by 26.4%, it said.
The committee voted to recommend the TWIA board use a blend of the RMS and AIR catastrophe models, using the model results based on long-term assumptions, to create a base PML of $5.67 billion, it said. It then also voted to recommend the board include a factor for loss adjustment expense of about 15% for the total PML of $6.5 billion, it said.
The TWIA board is expected to receive the committee recommendations when it meets Feb. 20 to determine the statutorily required PML.
Last year, the committee recommended the board set the 1:100 PML at $5.24 billion, but the board was wary of the non-traditional products needed to get to that point. The board chose not to add to the $4.5 billion it had already considered, which included $2.92 billion in reinsurance.
The decision not to act amounted to a win for Texas property/casualty insurers as the board did not take up a proposal that would have levied assessments on them to fund what P/C trade groups said was $700 million in “excess reinsurance.”
An attempt to obtain comment on the 2024 plan from the Insurance Council of Texas was not immediately successful.