Alamo Re Ltd. (Series 2024-1)

The Texas Windstorm Insurance Association (TWIA), the residual market property insurer for the State of Texas, has returned to the catastrophe bond market for what will be its tenth issuance under an Alamo Re issuance vehicle.

This new issuance for 2024 sees TWIA seeking $600 million of reinsurance from the start of its marketing, suggesting it could become one of the largest cat bonds it has ever sponsored.

As with previous TWIA-sponsored catastrophe bonds, we understand that global reinsurance firm Hannover Re will act as the ceding reinsurer to front the capital markets, while TWIA will be the reinsured party, sources explained.

Hannover Re will therefore front the Alamo Re special purpose insurer, entering into a retrocessional reinsurance agreement with it, while entering into a reinsurance agreement with TWIA to pass on the protection to the Texas based insurer.

Alamo Re Ltd., the Bermuda based special purpose insurer, is set issue three tranches of Series 2024-1 notes for this cat bond, with at least $600 million of reinsurance coverage sought for TWIA.

The reinsurance protection from all three tranches is for Texas named storms and severe thunderstorms, on an indemnity trigger and annual aggregate basis, so the same as previous Alamo Re cat bonds have provided to TWIA.

Two of the tranches of notes, Classes A and B, will provide three years of cover from June 1st to the end of May 2027, while the third Class C tranche will only cover two years from June 1st to the end of May 2026, we are told.

All three tranches need loss events to exceed $50 million in cost to TWIA, for those events to apply under the aggregate coverage, we understand.

A $300 million Class A tranche of notes will cover TWIA for losses from an attachment of $6 billion to $6.5 billion, giving the notes an initial attachment probability of 1.48% and an initial expected loss of 1.42%. These notes are being offered with spread price guidance of 6.5% to 7.5%, it’s said.

A $100 million Class B tranche of notes will cover TWIA for losses from an attachment of $3.65 billion to $6 billion, so sit beneath the A’s, giving the notes an initial attachment probability of 2.61% and an initial expected loss of 1.96%. They span a particularly wide layer of the tower and these notes are being offered with spread price guidance of 7.5% to 8.5%.

A $200 million Class C tranche of notes (so the two year tranche) will cover TWIA for losses from an attachment of $2.45 billion to $3.45 billion, giving the notes an initial attachment probability of 3.97% and an initial expected loss of 3.29%, so are a good deal riskier. These notes are being offered with spread price guidance of 11% to 12%, we understand.

Update 1:

The Texas Windstorm Insurance Association (TWIA) is aiming to double the size of its latest catastrophe bond issuance, with now $1.2 billion of reinsurance sought across the three tranches of this Alamo Re 2024-1 deal.

The Class A tranche of notes are now updated with a target size of $500 million and their price guidance has been narrowed and lowered to 6.5% to 7%.

The Class B tranche of notes are now targeted to be $300 million in size, while their guidance has also been narrowed and lowered to 7.5% to 8%.

The final Class C tranche of notes (so the two year tranche) are now targeted to be $400 million, while their spread price guidance has narrowed and fallen to 11% to 11.5%.

Update 2:

The target size for this latest cat bond from TWIA has increased again, with now $1.4 billion of reinsurance targeted from the issuance.

The Class A tranche of notes remain at their updated target size of $500 million, but their price guidance has been lowered further to between 6% and 6.5%.

The Class B tranche of notes have grown again to become a $500 million tranche, while their pricing has been fixed at 7.75%.

The final Class C tranche of notes (so the two year tranche) remain at their upsized $400 million, while their pricing has been fixed at 11.25%.

Update 3:

TWIA has now successfully priced its latest Alamo Re 2024-1 catastrophe bond to provide the upsized $1.4 billion of reinsurance.

The Class A tranche of notes remained $500 million, with their price finalised at 6%, so below the initial guidance

The Class B tranche of notes also remained at $500 million in size, with their pricing finalised within guidance at 7.75%.

The final Class C tranche of notes (so the two year tranche) remained at $400 million, while their price was also finalised within initial guidance at 11.25%.