Funding 101

Funding Highlights

  • TWIA losses and operating expenses are paid from the following funding sources: TWIA premiums and other revenue, the Catastrophe Reserve Trust Fund (CRTF), public securities, company assessments, and reinsurance
  • TWIA is not a state agency and does not receive General Revenue funds or any other state funds for operations
  • TWIA has never been unable to pay claims since its inception in 1971
  • Funding for the 2017 hurricane season is approximately $4.9 billion; sufficient to cover a 125-year storm season, or more than 99 percent of all possible storm seasons
  • Funding continues to improve each year and is the most since 2009
  • No assessments or surcharges would be required unless TWIA losses exceeded $1.3 billion
  • In September 2014, TWIA issued $500 million in pre-event Class 1 public securities to provide additional claims-paying capacity following a catastrophe, with no associated impact on rates
  • TWIA successfully placed $1.4 billion in reinsurance in 2017, including an additional$400 million in catastrophe bonds; together with previously issued catastrophe bonds totaling $700 million, the reinsurance would reimburse TWIA for up to $2.1 billion in actual, aggregate losses in excess of $2.8 billion

Authority & Legislation

Texas Insurance Code Chapter 2210 provides the funding structure to be used to pay TWIA’s insured losses and operating expenses. Prior to 2009, the Association funded losses through premiums and potentially unlimited assessments on insurance companies. HB 4409, enacted in 2009, significantly changed Association funding, providing for the issuance of up to $2.5 billion in Class 1, 2, and 3 public securities. SB 900, effective September 1, 2015, further modified the sources of funding and requires overall funding to cover at least a 100-year season.

Important Provisions

Current law provides that insured losses and operating expenses be paid from the following funding sources, in order:

    • TWIA premiums and other revenue
    • The Catastrophe Reserve Trust Fund (CRTF), an account held by the Comptroller containing the net gains from TWIA operations from prior years
    • $500 million in Class 1 public securities
    • $500 million in Class 1 company assessments
    • $250 million in Class 2 public securities
    • $250 million in Class 2 company assessments
    • $250 million in Class 3 public securities
    • $250 million in Class 3 company assessments
    • Additional funding in the form of reinsurance such that total funding is at least equal to a 100-year hurricane season.

Class 1, 2, and 3 public securities are repaid from TWIA premiums and surcharges on TWIA policyholders. If necessary for issuance, Class 2 and 3 securities may also be repaid from surcharges on coastal policies

2017 Funding

For 2017, TWIA has secured funding of $4.9 billion through a combination of $800 million in premiums and CRTF; $2 billion in Class 1, 2, and 3 public securities and assessments; and $2.1 billion in reinsurance. This is the highest level of funding since 2009, is enough to cover a 125-year storm season, or more than 99 percent of all possible storm seasons.

In March 2017, TWIA contributed approximately $147 million to the Catastrophe Reserve Trust Fund from 2016 operations. TWIA projects to have $1.3 billion in liquid funds immediately available to pay claims for the 2017 storm season between 2017 premiums, the CRTF, and Class 1 public securities.