Swiss Re Insurance-Linked Fund Management

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Alamo Re Ltd. (Series 2018-1)

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Alamo Re Ltd. (Series 2018-1) – At a glance:

  • Issuer: Alamo Re Ltd. (Series 2018-1)
  • 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: May 2018

Alamo Re Ltd. (Series 2018-1) – Full details:

This is the fourth Alamo Re catastrophe bond to benefit the Texas Windstorm Insurance Association (TWIA) with reinsurance protection from the capital markets. It’s the second cat bond transaction where TWIA has included Texas severe thunderstorm protection to the covered perils, alongside Texas named storms.

German reinsurance firm Hannover Re is again assisting TWIA to bring this new Alamo Re transaction to market, acting as the ceding reinsurer for the transaction. TWIA will enter into a reinsurance agreement with Hannover Rück SE which will then enter into a retrocession agreement with Alamo Re Ltd. to effect this 2018-1 cat bond transaction.

Special purpose insurer Alamo Re Ltd. will seek to issue a single $300 million tranche of Series 2018-1 notes which will be exposed to losses from Texas named storms and Texas severe thunderstorms over a three-year term.

The reinsurance protection that TWIA will benefit from is on an indemnity and annual aggregate basis, with only loss events that cause a $50 million or greater loss to the insurer qualifying under the terms of this new cat bond, we understand.

We’re told that the attachment point for the $300 million of notes will be at $2.8 billion of losses to TWIA and the notes will cover a percentage of losses up to an exhaustion point of $4.2 billion, with the Alamo Re 2018-1 cat bond notes sitting alongside TWIA’s planned 2018 reinsurance renewal.

There is room for growth and we understand that if market conditions support it, TWIA could opt to upsize this cat bond to account for more of the coverage within that wide layer of its reinsurance tower, given the layer it is seeking to renew this year is $1.4 billion in size.

The $300 million of Series 2018-1 notes to be issued by Alamo Re will have an initial attachment probability of 2.19%, an initial expected loss of 1.65% and are being offered to ILS investors with coupon guidance of 3.5% to 4%, it’s said.

Update 1:

We understand that the Alamo Re Ltd. (Series 2018-1) multi-peril cat bond is now targeting up to $400 million of collateralized reinsurance for the residual market property insurer.

At the same time the price guidance has now been lowered to below the initial range, dropping to 3.25% to 3.5%.

Update 2:

The Alamo Re 2018-1 cat bond issuance successfully achieved the increased target size of $400 million for TWIA, while the pricing finally settled at 3.25%, a whole 13% lower than the mid-point of initial pricing and reflecting a multiple of lesss than 2 times the expected loss.

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