Texas to buy $1.5bn cover as hurricane season looms
The Texas Windstorm Insurance Association (TWIA) is set to buy $1.5bn in reinsurance cover with this year’s North Atlantic hurricane season only days from its official start.
TWIA’s request to increase its reinsurance spend this year has now been approved by the state’s insurance commissioner Mike Geeslin.
The state-backed “insurer of last resort” proposed a $500mn increase from the $1bn coverage it purchased last year.
“The decision is based on the growing concentration of exposure in certain regions and the need to shield policyholders and the general revenue tax dollars from even a modest storm,” Geeslin said.
“Long term, the Texas Department of Insurance will work with the Legislature in crafting a solution that gives us more funding options.”
The TWIA’s executive director James Oliver said the “increase is based on the substantial increase in TWIA’s maximum loss because of significant growth during 2007”.
In Galveston County the Association’s exposure has risen by $600mn to $18.5bn so far this year and its total exposures statewide now top $65bn.
The estimated cost of the reinsurance programme is $184.125mn or about 49 percent of TWIA’s estimated direct written premium for 2008, according to the commissioner’s order, which approved the request.
“The first layer of the reinsurance program provides $500mn in coverage of losses in excess of $600mn,” according to the commissioner’s order.
“The second layer provides $500mn in coverage of losses in excess of $1.1bn, and the third layer provides $500mn in coverage of losses in excess of $1.6bn.”
“The commissioner’s decision will provide TWIA and [its] customers with additional layers of financial protection and help avoid a significant drain on the State's General Revenue Fund in the event of a major hurricane,” stated Jerry Johns, president of the Southwestern Insurance Information Service.