Alamo Re Ltd. (Series 2022-1)

The Texas Windstorm Insurance Association (TWIA), the residual market property insurer for the State of Texas, is using its Bermuda domiciled special purpose insurer (SPI) Alamo Re Ltd. for this latest cat bond issuance.

Alamo Re will look to issue a single tranche of Series 2022-1 Class A notes that will be sold to investors and the proceeds used to collateralize a $185 million or larger source of multi-year reinsurance protection against losses from named storms and severe thunderstorms in Texas.

As with every TWIA-sponsored catastrophe bond so far, we’re told that TWIA is again using the services of global reinsurance firm Hannover Re as the ceding reinsurer, while TWIA is the reinsured party.

Hannover Re will therefore front the SPI, entering into a retrocessional reinsurance agreement with Alamo Re, while entering into a reinsurance agreement with TWIA to pass on the protection.

The $185 million of Series 2022-1 Class A notes will provide TWIA with three-years of reinsurance protection against losses from named storms and severe thunderstorms in the state of Texas, on an indemnity trigger and annual aggregate basis, we understand.

The Class A notes would attach at $2.2 billion of losses to TWIA, after a $50 million event deductible, sources said, covering a share of losses up to detachment at $2.843 billion.

That gives the Class A notes an initial expected loss of 2.51% at the base case, while the notes are being offered to cat bond investors with price guidance in a range from 6.75% to 7.25%, we understand.

Update 1:

We’re now told that TWIA’s target for this latest cat bond is fixed at $185 million.

At the same time, the coupon price guidance has been narrowed towards the top of the initial range, at 7% to 7.25%.

Update 2:

TWIA’s new Alamo Re 2022-1 catastrophe bond did upsize in the end, to provide it $200 million of reinsurance protection.

The pricing was eventually fixed to pay investors a top-of-guidance (but still within it) coupon of 7.25%.