TWIA boosts finances with $500m bond
The Texas Windstorm Insurance Association (TWIA) has said it is in its best financial position since Hurricane Ike in 2008 having raised $500 million to assist in paying future catastrophic claims.
The funds were raised through the issuance of pre-event Class 1 bonds by the Texas Public Finance Authority on behalf of TWIA.
TWIA said the bond, combined with its reinsurance programme, which also includes a catastrophe bond for the first time, means it is now in its best financial position since Hurricane Ike in 2008.
“We’re very excited about the bond issuance, which will provide $500 million in funds that will be immediately available to pay claims after a catastrophe,” said TWIA’s chief financial officer, Pete Gise.
“The bonds bring our total funding for the 2014-2015 catastrophe season up to $3.85 billion. This is over a billion dollars more than the combined losses from Hurricanes Dolly and Ike, and would enable TWIA to pay claims associated with 98.6 percent of all modelled storms, or in other words, a 70-year storm. This also brings us closer to achieving our goal of securing funding for a 100-year storm.”
With a relatively low number of losses in 2014, it is projected that TWIA will be able to contribute over $200 million to the Catastrophe Reserve Trust Fund (CRTF). Texas law requires TWIA to contribute any profits into the CRTF at the end of each year.
TWIA has recently purchased $1.45 billion in reinsurance coverage, including $400 million in catastrophe bonds. TWIA’s funding structure for 2014 provides that after $1.9 billion dollars in losses have been incurred, reinsurance will pay for the next $1.45 billion.
“TWIA appreciates the assistance of the Texas Public Finance Authority, the Texas Department of Insurance and Bank of America Merrill Lynch in successfully securing this most recent funding element and emphasizing our commitment to provide financial security to our policyholders,” said TWIA’s general manager, John Polak.
