The latest information on post-event bonding issues

David Crump [1], one of the clearer thinkers on catastrophe insurance in Texas has done some excellent work in getting information on the ability of Texas to sell post event bonds — and the likelihood that we would have to do so following a signifiant storm.  I’m reprinting his email below, putting the document from the Texas Public Finance Agency at the bottom of this post, and providing access right here to the response TWIA provided to Mr. Crump’s public information request.  Good work, Mr. Crump!

Folks – As I have in the past, I share my Public Information Responses (PIR) from TWIA (Texas Windstorm Insurance Assoc.). Please see attached. 

 I have also included the TPFA (Texas Public Finance Authority) assessment of the marketability of the TWIA Class 1 bonds (paid from future TWIA revenues) with my underlining. This is the first page of the written testimony provided at the November 1 TWIA oversight hearing. I appreciated Rep. John Smithee’s probing questions of TPFA about the post-event bonds at this hearing. The TPFA is the authority actually charged with selling and issuing the bonds.

I don’t have a complete handle on all this information yet but my gut call is that we are going into the 2013 hurricane season with $1.8 billion in claims funding capability from TWIA as follows:

1. TWIA Cash on-hand – $100 million – assumes no large storm losses prior to 6/1/2013

2. CRTF (Catastrophic Reserve Trust Fund) – $205 million

3. Class 1 post-event bonds – not marketable per TPFA analysis (see attached)

4. Class 2 post-event bonds – $1 billion*

5. Class 3 post-event bonds – $500 million**

6. Reinsurance – no current funds available to purchase

 *The TWIA PIR attached indicates that if the class 1 bonds are not sold, then half of the class 2 bond repayment would be dependent on TWIA to repay (i.e., future revenue stream). This could also impact the marketability of the class 2 bonds.

 ** It is unclear to me if the Class 3 bonds could be issued without the Class 2 bonds being fully executed.

This outcome is well below TWIA’s probable maximum loss risks. Prior PIR’s from TWIA provided 75 percentile modeled storm results of $6.6 billion for Galveston and $5.5 billion for Corpus Christi from a Category 4 hurricane strike. It continues to be my contention that TWIA is an insecure insurance entity without the ability to fund claims up to the expected losses from a category 4 hurricane strike on either of our two main coastal economic concentrations (Galveston or Corpus Christi). For reference, the claims from hurricane Ike and Dolly in 2008 to TWIA were initially $2.3 billion (but they have paid out more since 2008 due to ongoing litigation).

This is an unacceptable situation for our coastal residents who depend on their TWIA insurance contracts to pay their claims and is an unacceptable economic risks for the coastal communities, the TWIA service area (the entire Texas coast) and the overall Texas economy. 

Sincerely, David

David Crump, The Focused Moderate

TPFA Class 1 TWIA Bond Assessment 001

TPFA Class 1 TWIA Bond Assessment 001


[1] I have this strange situation where I know two people named David Crump in Texas.  One’s my Focused Moderate who has particular concerns about catastrophe insurance and the other is my colleague at the University of Houston Law Center.

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