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Reinsurance intermediary Guy Carpenter has retained its long standing and lucrative business with the Texas Windstorm Insurance Association (TWIA), beating finalists Holborn and Willis.
However, board members and staff said that they expect the broker to bring “creative” ideas to the table as depopulation and hail become a greater issue and as they consider significant changes to their reinsurance cover.
“I’m just surprised it was such a close vote. This is a big number and we spend a lot– $100 milion plus — [on reinsurance],” said TWIA board member Michael Gerik during a meeting Tuesday. “Guy Carpenter is on notice to bring [new] ideas to the table.”
Guy Carpenter beat out its two rivals in a four to three vote of the underwriting committee following an RFP process initiated by TWIA this year.
“This was just part of our due diligence we wanted to open that process up to make sure we are still with the correct broker,” said James Murphy, TWIA vice president and actuary, adding that the committee scored both written and oral presentations, “Guy Carpenter got higher score, but scores were relatively close.”
Although three members of the underwriting committee “felt very strongly to make a change,” retaining Guy Carpenter was TWIA best option, said board member and treasurer Debbie King.
King explained there were four issues key to the close vote.
- Depopulation: “We need a broker to help us through the process. The analytics are going to be very important to understand changes in exposure base.
- Creativity: “The brokers came with many creative ideas on how to restructure refinance. Often these structure a can do the same [for TWIA] with less dollars spent, and that was very attractive.”
- The ability to support multi year or multi event event loss scenarios.
- Hail: “In many ways hail has become more of an issue than windstorm,” King said, adding that there was discussion of creating a separate aggregate cover for hail losses.
The underwriting committee also was intrigued by broker arguments to move more of TWIA’s exposure from traditional reinsurance into the capital markets, said John Polak, TWIA general manager.
“The key issue was an appreciation that the capital markets has become increasingly competitive,” Polak said. “It was point to out that if you were to shift from traditional reinsurance to catastrophe bonds there would be a significant savings, somewhere around $28 million.”
- Changes to Mr. Polak’s quotes were made for clarity.
- Michael Gerik’s name was misspelled and corrected.
- A TWIA spokesman said in an email response to this article that while the underwriting committee vote was close, the full board unanimously voted to approve Guy Carpenter’s contract renewal.