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Alamo Re II Pte. Ltd. (Series 2020-1)

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Alamo Re II Pte. Ltd. (Series 2020-1) – At a glance:

  • Issuer: Alamo Re II Pte. Ltd.
  • Cedent / sponsor: Texas Windstorm Insurance Association (TWIA)
  • Placement / structuring agent/s: GC Securities is sole structuring agent and bookrunner
  • Risk modelling / calculation agents etc: AIR Worldwide
  • Risks / perils covered: Texas named storms and severe thunderstorms
  • Size: $400m
  • Trigger type: Indemnity
  • Ratings: NR
  • Date of issue: Jun 2020

Alamo Re II Pte. Ltd. (Series 2020-1) – Full details:

The Texas Windstorm Insurance Association (TWIA) has launched its expected 2020 catastrophe bond issuance, with a target for $200 million of new reinsurance protection from an Alamo Re II Pte. Ltd (Series 2020-1) transaction.

As expected, TWIA has registered a new special purpose insurer (SPI) for its latest catastrophe bond issuance, but for the first time it has selected Singapore as the issuance domicile, registering special purpose reinsurance vehcile Alamo Re II Pte. Ltd.

Alamo Re II Pte. Ltd. will seek to issue a single $200 million tranche of Series 2020-1 Class A notes, which will be sold to investors and the proceeds used to collateralise the necessary reinsurance agreement to provide coverage.

As with all of TWIA’s catastrophe bonds to-date, the company is using the services of global reinsurance firm Hannover Re as the ceding reinsurer, while TWIA is the reinsured party.

We understand that the Alamo Re II 2020-1 cat bond will provide TWIA with a three-year source of reinsurance protection against losses from Texas named storms and severe thunderstorms.

Coverage will be on an indemnity trigger and annual aggregate basis, attaching at $2.1 billion and running alongside other coverages including previous cat bond issues ($400 million of Alamo Re Ltd. (Series 2018-1) cat bonds and $200 million of Alamo Re Ltd. (Series 2019-1) cat bonds) and traditional reinsurance up to an exhaustion of the layer at $4.2 billion, as documented in the layer chart we published last week.

As a result, we’re told the new Alamo Re II Series 2020-1 Class A notes will have an initial expected loss of 1.78% and that they are being marketed to cat bond investors with coupon price guidance in a range from 5.25% to 5.75%.

For comparison, last year’s Alamo Re 2019-1 cat bond had an initial expected loss of 1.8% and priced at 4.5%, meaning this new cat bond from TWIA is offering 17% better pricing even at the low-end of guidance, 22% better at the mid-point and 28% at the top-end of that guidance.

Update 1:

TWIA has lifted its target for its new Alamo Re II Pte. catastrophe bond for 2020, with the insurer now hoping to secure between $300 million and $400 million of reinsurance from the capital markets with this issuance.

At the same time, the coupon guidance has been raised to the upper-end of guidance, at 5.75%, to offer investors a higher multiple at market.

Update 2:

TWIA secured the top-end of the target size for its new Alamo Re II 2020 catastrophe bond, with the deal upsizing by 100% to reach $400 million.

The pricing was fixed at the top-end of initial guidance, at 5.75%.

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