The Texas Windstorm Insurance Association’s (TWIA) reinsurance renewal for 2026 is fully-committed by markets and expected to be signed in the next couple of days, while Allen Cashin of Gallagher Re said that the competitive auction-like process the broker employed has resulted in the “optimal structure at the lowest price.”
With catastrophe bond maturities and a significant amount of early redemptions of cat bonds coming, the Texas Windstorm Insurance Association (TWIA) only maintains $300 million of cover from the Class B and C notes of its Bluebonnet Re Ltd. (Series 2025-1) deal sponsored a year ago.
But, TWIA has successfully secured a new Alamo Re Ltd. (Series 2026-1) catastrophe bond sponsorship that will provide an additional $750 million of multi-year reinsurance to the insurer of last resort.
As a result, TWIA will have $1.05 billion of its roughly $2.28 billion of risk transfer and reinsurance need supplied by the cat bond market in 2026, while a further roughly $1.23 billion of reinsurance will be provided in traditional form, although perhaps some being from collateralized or fronted ILS markets we expect.
More details on that and how the maturities and early redemptions of cat bonds factor in here.
At a Board meeting yesterday, TWIA’s leadership heard from its broker Gallagher Re, which has been placing the new cat bonds reinsurance for the insurer.
Allen Cashin, Head of Programs, North America for Gallagher Re explained, “It is our fifth year placing the reinsurance, so we’re very proud and thankful to represent you guys in the reinsurance market. The programme is fully committed and will be signed in the next 24/48 hours, with the direction of staff. All the coverages met the requirements of the board, as does the financial security of the reinsurance markets.”
Cashin continued, “We did place $750 million of cat bonds this year, as well as the $300 million that rolls over from last year and all of this was done under the budget that was discussed and approved at the last board meeting.
“So, I want to thank my team, staff, legal counsel. It is a big lift to do this programme, a lot of time, calls and emails invested in this. So thank you for the opportunity, and a great outcome for Windstorm and its members.”
Asked by a TWIA Board member about the rate-on-line, Cashin said it cost just under a $212 million spend, which is around a gross rate-on-line of 10%. That is comparable to the rate-on-line of last year’s placement, but in 2025 TWIA bought significantly more reinsurance as it was mandated to buy to the 1-in-100 year level.
Cashin went on to explain how Gallagher Re ensured best execution of its reinsurance renewal tower for TWIA this year.
“The market is much more favourable. It’s been a difficult couple years for reinsurance buyers, for sure. I think what the team and the staff did really well this year is create an auction-like environment,” Cashin said.
He further explained that, “You’ve got the ILS capacity, which is mostly cat bond, you have the traditional reinsurers all over the world. What we did, and this is months of preparation, was set up those two markets to auction and compete for your business, directly on the same layer.
“So you have cat bond investors, which are basically asset managers, pension funds over the world, competing directly with traditional reinsurance markets, and therefore it’s the optimal structure at the lowest price.”
As for why TWIA didn’t opt to place more in the catastrophe bond market if it was so favourable this year, the discussion at the Board meeting focused on the need to maintain a balance between market sources of risk capital, particularly with a view out to 2027 and beyond.
TWIA has been moderating its exposure growth and the new 1-in-50 year PML means less reinsurance was required this year, so it is uncertain how much it could require for 2027 and onwards.
As a result, currently TWIA has the $750 million of reinsurance from its new Alamo Re 2026-1 catastrophe bond that will run through the 2027 hurricane season as well, providing a solid foundation to build a new program on next year.
So, it looks like TWIA is set to secure all of the roughly $1.23 billion of reinsurance it needs to add to the $1.05 billion of cat bonds it will have from the traditional market, although as we said some of this may also be sourced from ILS markets that are fronted or collateralized we suspect.
The TWIA Board also approved a new $500 million line of credit at the meeting as an additional liquidity buffer against major storms striking the state, with an option to extend the line by an additional $200 million if needed to further bolster its claims paying and storm response capabilities
Finally, it’s worth also mentioning that TWIA is set to run a new RFP for reinsurance brokerage and risk modelling services, something it has to do every few years.
A new process means that TWIA’s staff will review the RFP responses and make a direct recommendation to the Board, for the reinsurance broker at the next August meeting and for the risk modeller at the Board’s November meeting.
The RFP for reinsurance broker will begin in June, after the reinsurance renewal is finalised. Once completed, an RFP will be immediately issued for catastrophe modeller services. By statute, the reinsurance broker and modeller have to be separate companies.
Board members highlighted that there is no obligation to change and incumbent Gallagher Re is expected to respond to the RFP when available. On the catastrophe risk modelling side, Aon’s Impact Forecasting is the incumbent and likely to respond to the RFP again.
TWIA has been directly sponsoring catastrophe bonds since 2014.
Read all about the new Alamo Re Ltd. (Series 2026-1) catastrophe bond for the Texas Windstorm Insurance Association and every other cat bond transaction in the Artemis Deal Directory.
