TWIA to leverage ILS in $1.25bn cover
The Texas Windstorm Insurance Association’s (TWIA) board of directors has approved a plan to issue its first catastrophe bond in 2014.
James Murphy, the association’s chief actuary, discussed the details of the proposal to the board and explained that the $1.5 billion catastrophe bond issued by Florida Citizen’s was further proof that it is a good time to enter into the catastrophe bond market.
“Not only is that the largest catastrophe that’s been issued in the US but it was priced significantly lower than the cat bonds Florida issued last year,” he said.
Based on preliminary pricing, Guy Carpenter, TWIA’s broker, believes that it can secure $1.25 billion in reinsurance coverage for its client in a programme that would include both traditional reinsurance and a catastrophe bond.
This is a significant increase from last year where TWIA had $1 billion in reinsurance in place due to increasing retention and a softening market.
The board agreed on an aggregate programme for 2014 which provides increased cover for a series of smaller storms, unlike in the past where it has followed a per-occurrence programme.
The reinsurance programme will sit above a retention of at least $1.9 billion, although it could hike up to $2.2 million if class I public securities become available.
The traditional reinsurance part of the programme will be a 12 month contract, while the catastrophe bond portion will be a three year deal.
