TWIA’s Alamo Re cat bond hits $400m, with pricing below guidance

by Artemis on May 24, 2017

The Texas Windstorm Insurance Association’s (TWIA) latest Alamo Re Ltd. (Series 2017-1) catastrophe bond is now set to achieve its upsized target of $400 million, while at the same time the cost of the reinsurance coverage looks particularly efficient with pricing of the coupon now fixed at below guidance.

Hitting the upsized $400 million target means that TWIA will secure 60% more reinsurance capacity from the capital markets through its third Alamo Re cat bond issuance, as the deal was initially launched at just $250m in size.

At the same time, the appetite of ILS and catastrophe bond investors for access to risk continues to grow, helping the sponsor to achieve much lower pricing than initially thought, with the coupon now fixed below the lower end of initial price guidance.

For TWIA that means a more efficient execution of this its latest catastrophe bond deal, with it now set to secure $400 million of fully-collateralized reinsurance protection against losses from named storms and severe thunderstorms in the state of Texas on an annual aggregate and indemnity trigger basis.

This is the first time TWIA has added severe thunderstorm risk into its cat bond mix, and despite the fact it contributes only a small level of expected loss to the deal it is still impressive and a sign of investor appetite that the Alamo Re 2017-1 cat bond issuance has both expanded in size and achieved a cheaper premium for the insurer.

The transaction was first launched with a single $250 million tranche of Class A notes offered to cat bond investors with coupon price guidance in a range from 3.9% to 4.4%.

The target size was then lifted to between $350 million and $400 million, while at the same time the pricing was lowered and narrowed to coupon guidance of 3.75% to 3.9%, so below the initially marketed range.

Now, we’re told, the transaction has been priced, with a coupon of 3.75% set, so at the bottom end of the already reduced pricing range reflecting a good reduction in costs for TWIA in securing this reinsurance protection.

The Alamo Re Ltd. (Series 2017-1) catastrophe bond is scheduled for completion at the end of May, in advance of TWIA’s June 1st reinsurance renewal. We’ll continue to update you as more information becomes available and you can read about this and every other cat bond in the Artemis Deal Directory.

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