The TWIA Board has approved a $485 million reinsurance budget for 2025, which is a 22% increase from the 2024 expenditure.

The Board of the Texas Windstorm Insurance Association (TWIA) has approved a budget of $485 million for ceded reinsurance and catastrophe bonds in 2025, which represents a 22% increase from the $397 million spent on protective measures in 2024.

As reported last month, TWIA projected that it would need nearly $5.8 billion in reinsurance and catastrophe bond coverage for the next year, a significant rise from the just over $4 billion in reinsurance coverage secured for the 2024 wind season.

TWIA started its funding for the 2024 storm season with an initial budget of $298 million for reinsurance and catastrophe bonds. After purchasing more reinsurance than initially projected and navigating a tough reinsurance marketplace, TWIA ended up spending $397 million on its reinsurance and catastrophe bond tower for 2024.

For 2025, TWIA will need to secure reinsurance lower down in its funding structure, as losses from Hurricane Beryl, which cost $455 million, nearly depleted the Catastrophe Reserve Trust Fund (CRTF). In 2024, TWIA secured $4.05 billion in reinsurance and catastrophe bond coverage. However, for 2025, the projection now stands at potentially $5.795 billion, a 43% increase.

At today’s TWIA Board meeting, the 2025 budget was presented with a line item for ceded reinsurance costs at $485 million. The TWIA Board has approved the budget, so the staff of the Texas windstorm insurer will work with risk modellers from Aon and reinsurance broker Gallagher Re to develop a strategy and determine the necessary reinsurance and catastrophe bonds required for 2025.

With a need for nearly $5.8 billion in reinsurance, up from the $4.05 billion in reinsurance and catastrophe bond coverage in place this year, TWIA may need to secure more traditional reinsurance and catastrophe bonds. Conditions in both the reinsurance and catastrophe bond markets are more favorable, so it will be interesting to see how TWIA’s program develops next year as it seeks to secure its protection for the 2025 windstorm season.