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 2018 hurricane season is approximately $4.6 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

2018 Hurricane Season Funding

TWIA’s 2018 catastrophe funding program, effective June 1, 2018 to May 31, 2019, provides access to $4.6 billion in total funding, an amount in excess of the statutory minimum funding. The funding program includes $1.0 billion of traditional reinsurance and $1.6 billion in new and previously outstanding catastrophe bonds placed atop the $2.0 billion of total statutory funding sources. The traditional reinsurance program provides coverage on an aggregate basis, meaning multiple hurricane events would be covered under the same reinsurance program.