The Texas Windstorm Insurance Association (TWIA) is now set to finally appoint insurance and reinsurance broker Aon to provide catastrophe risk modeling services, after the company was recommended by its Actuarial & Underwriting Committee after a second round of RFP’s.TWIA had issued a request for proposals (RFP) for catastrophe modeling services back in October 2021 and .That happened at the same time as TWIA’s Board considered a change in reinsurance broker and .However, on the new risk modelling service provider, TWIA’s Board asked for the RFP to be reissued, possibly due to there being too few responses the first time around, as it seems only Aon responded that time.

So the RFP for catastrophe modelling services was issued again in December and this time responses came in from Aon, Guy Carpenter and also AIR Worldwide (part of Verisk).The successful company would provide catastrophe modeling analysis to help the TWIA Board in its determination of the 1-in-100-year probable maximum loss for the 2022 hurricane season and also in making reinsurance purchase decisions.The Committee met yesterday and Aon has won the proposal and now a recommendation will be made to the TWIA Board to approve Aon’s appointment.

Aon had pitched two levels of catastrophe modelling services and we understand the Committee opted for Option 2 the first time around and presumably again yesterday, with a $1.6 million cost attached to that level of service.We expect to see TWIA return to the catastrophe bond market in the first-half of 2022, in particular as the Association may look to harden up its reinsurance arrangements in 2022, after the significant effects of losses from hurricane Ida last year., all of which were brought to market with the assistance of AIR Worldwide as the third-party risk modeller.

We expect that won’t change, as it is not typical for a broker-owned modelling team to work on 144A catastrophe bonds, with the large, independent risk modeling firms more likely to be selected for this role.The Aon catastrophe modeling services will provide valuable insights to help inform TWIA’s reinsurance purchases and use of catastrophe bonds going forwards though, with critical decisions often taken based on the PML of the TWIA portfolio and how much cover it needs to buy as a result.TWIA’s reinsurance program , reflecting the importance of access to the insurance-linked securities (ILS) market for the residual market insurer———————————————————————.

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