The Texas Windstorm Insurance Association (TWIA) has successfully secured the pricing of its new Alamo Re Ltd. (Series 2018-1) multi-peril catastrophe bond at the increased target size of $400 million, while the coupon settled 13% lower than the initial mid-point of price guidance.
This is TWIA’s fourth cat bond and the second multi-peril arrangement, as the residual market insurer for the state of Texas sought reinsurance protection against losses from both Texas named storm and severe thunderstorm risks.
Assisting TWIA in getting the new catastrophe bond to market is global reinsurance firm Hannover Re, which takes the role of ceding reinsurer through its Hannover Rück SE entity, which then enters into retrocessional agreements with Alamo Re to effect the coverage.
The transaction was launched a fortnight ago, as a $300 million catastrophe bond that would provide TWIA with catastrophe reinsurance protection on an indemnity and annual aggregate basis, covering loss events resulting in a $50 million or greater loss to the insurer.
The target was lifted to a maximum of $400 million, as we reported yesterday, and sources now say that TWIA has been able to capitalise on capital market investor appetite for new catastrophe bond issues and secured the $400 million layer of reinsurance from the capital markets.
At the same time the pricing has dropped to well below the initial range.
The Alamo Re notes were first offered to ILS investors with coupon guidance in a range from 3.5% to 4%, which was subsequently lowered to a range of 3.25% to 3.5%.
We’re now told that pricing for the $400 million of Alamo Re 2018-1 Class A notes has been fixed at the lowest end of reduced guidance, at 3.25%, reflecting a 13% drop from the mid-point of launch pricing and a multiple of 1.97 times the initial expected loss of 1.65%.
So yet another 2018 catastrophe bond is successfully upsized and sees its pricing drop while marketing, demonstrating the demand from investors and the efficiency of ILS capital at this years renewals.
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