The Texas Windstorm Insurance Association (TWIA) has finalized its funding strategy for the 2025 storm season, setting the 1:100 probable maximum loss (PML) at US$6.227 billion. The Association plans a multi-pronged approach to meet this funding requirement, leveraging reinsurance, statutory funding, and existing resources.
To bolster its financial preparedness, TWIA intends to secure US$1.727 billion in reinsurance, aiming for the most favorable market conditions. This will be combined with US$2 billion in statutory funding and the existing US$2.5 billion in multi-year catastrophe bonds and reinsurance. This combination brings TWIA’s total funding for the 2025 storm season to the required US$6.227 billion.
The announcement follows reports received by the board from staff, including financial updates for 2024 and plans to allocate funds from the Catastrophe Reserve Trust Fund to cover claims related to losses from Hurricane Beryl. In 2024, TWIA had established a total funding of $6.5 billion, comprising US$1.95 billion in traditional reinsurance and US$2.1 billion in catastrophe bonds. Hurricane Beryl was a major loss event last year, prompting multiple catastrophe bulletins from the Texas Department of Insurance addressing claims handling, storm deductibles, and underwriting practices. Additionally, the devastating Smokehouse Creek Fire underscored Texas’s vulnerability to various natural disasters beyond hurricanes.
TWIA’s 2025 reinsurance program is designed to address the 1:100 PML, the level of losses expected to be met or exceeded in only 1% of scenarios. This PML figure determines the minimum funding level mandated by state law and also influences the amount of reinsurance the Association must secure for the upcoming storm season.
The TWIA board also approved a blended catastrophe modeling approach. This includes data from Aon’s Impact Forecasting (50%), Moody’s RMS (25%), and CoreLogic’s RQE (25%). These models, commonly employed in the property insurance industry, produced a base PML of US$5.415 billion utilizing long-term assumptions. The board further incorporated a 15% adjustment for loss expenses, increasing the total PML to US$6.227 billion.
