TWIA will close $6.5bn tower within days, adds $900m cat bonds for ‘24
The Texas insurer of last resort TWIA may close its reinsurance programme within days, tying down the final $1.2 billion in traditional reinsurance to a $6.5 billion tower that includes record levels of cat bonds.
“A large majority of it has been placed,” an official from Gallagher Re told the TWIA board meeting.
“As of now we have enough support to execute and sign the programme over the next couple of days,” he said of the just over $1.2 billion in traditional reinsurance that had been required to hit the $6.5 billion PML target. Conclusion looks likely Wednesday-Thursday (May 8-9), he said.
After a cash reserve, public securities and member assessment layers, the $6.5 billion target required $4.05 billion in total reinsurance, an 80% increase on the prior year cover. The sum included $3.35 billion in new purchases above and beyond the $700 million of existing cat bonds still in play for the 2024 season.
Above the $2.45 billion bottom attachment point for reinsurance facilities, cat bonds play a fractionally larger role than traditional reinsurance.
The first billion is split 60-40 traditional to cat bonds, then balanced out by another $200 million layer of cat bonds. The next $2.35 billion of limit to the $6 billion mark again tips lightly to traditional reinsurance, but the scales tip back to cat bonds with a $500 million top layer.
All in all, that's $2.1 billion via cat bond vehicle Alamo Re, up from $1.2 billion the prior year, and $1.95 billion in traditional reinsurance, versus $1.04 billion in 2023. As a portion of the total tower, cat bonds rise to 32%, ahead of 30% for traditional reinsurance.
“Buying two billion of additional limit in what is a really difficult reinsurance market is very, very challenging,” a Gallagher colleague told the board to tip the hat to TWIA management which he said had worked extensively on the road to woo investors.
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