Reinsurance and catastrophe bond market participants may not see a typical large protection buy from the Texas Windstorm Insurance Association (TWIA) in 2026, as the latest exposure data from the suggests it may only need just over $355 million of new risk transfer this year, with cat bonds set to provide the rest of its needs.
That immediately slashed expectations for TWIA’s 2026 reinsurance and cat bond purchases, but now the all-important exposure data is available and it shows that new limit required will be minimal.
That’s if the TWIA board elect to purchase the bare minimum coverage for 2026, so to fund the Association to the 1-in-50 year level.
The board does have the option to buy more and the costs for any reinsurance purchased above the 1-in-50 can be passed on to members as well. So there is still some uncertainty, but should it come down to the 50-year PML purchase then the new limit TWIA buys from the reinsurance or cat bond market this year will be relatively small, in comparison to its typical risk transfer purchases.
To recap, when TWIA purchased its reinsurance and catastrophe bonds for the 2025 hurricane season it did so based on a $6.227 billion 1-in-100 year PML, which after other funding sources meant that TWIA renewed $4.227 billion of reinsurance and cat bonds last year.
Previously we made some calculations based on TWIA’s PML as of August 2025, which indicated that at the 1-in-50 year PML and using the blend of risk models it has adopted, the Association’s minimum funding level might have been around $4.32 billion, which indicated a reinsurance and cat bond tower of around $2.3 billion.
But, the decisions on buying risk transfer are usually informed with the November 30th exposure data from TWIA, which is now available.
Documents seen by Artemis show that based on its adopted cat model blend, TWIA’s 1-in-50 year PML will actually be slightly lower at $4.3051 billion for 2026.
With $2 billion of statutory funding available, that means a reinsurance and catastrophe bond risk transfer tower of around $2.3051 billion is required to meet the minimum funding level, so close to previous projections.
But, TWIA is going to have $1.95 billion of catastrophe bonds in-force for the 2026 hurricane season from those still effective that were placed in 2025 and prior.
Meaning the net-new reinsurance or cat bond backed risk transfer required could be as low as just over $355 million.
There is the potential for some funding to be added via the CRTF, or Catastrophe Reserve Trust Fund as well, which sits at the bottom of the funding tower. In which case TWIA could even require a little less in new risk transfer.
For comparison, TWIA purchased $1.727 billion of net-new reinsurance and cat bonds in 2025 and similarly meaningful amounts in prior years as well.
Over the years the catastrophe bond program has delivered greater multi-year certainty to TWIA’s funding, with this set to persist.
Of course, TWIA will need to adjust its existing catastrophe bonds at their reset to make them fit into a far shorter funding tower. Cat bond resets can come with certain limitations, as to how far their risk metrics can change, so it’s not certain all of the outstanding cat bonds will be easily accommodated. Although, from what we’ve seen of the deal’s terms, we believe they might be flexible enough.
There’s also a question over whether TWIA looks to traditional or collateralized reinsurance, or sees the cat bond market as keenly priced enough to warrant locking in additional capital markets backed protection, in which case the traditional reinsurance market may even see little to none of the TWIA purchase this year.
That would be notable, as TWIA is already one of the biggest users of cat bonds, in terms of the percentage of the reinsurance tower they occupy.
There is a board meeting next week at which we may learn more about whether there is any desire to buy above the 1-in-50 year PML level, which could result in more risk being ceded.
Given the softening of the market, there is a chance the budget for risk transfer may go further than anticipated too. So there remain some facts to define, but for now it’s clear that TWIA’s new reinsurance and cat bond need has shrunk considerably for 2026.
TWIA has been directly sponsoring catastrophe bonds since 2014 and remains one of the largest sponsors in our cat bond market sponsor leaderboard.
