Bluebonnet Re Ltd. (Series 2025-1)

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 eleventh issuance, as it seeks more capital markets backed multi-year reinsurance protection.

For 2025, the Texas Windstorm Insurance Association (TWIA) is using a new Bermuda based issuing structure named Bluebonnet Re Ltd.

It’s worth noting that Bluebonnet Re Ltd. is also being used by the Texas Fair Plan Association (TFPA) at this time for its debut catastrophe bond under a different series number (Bluebonnet Re 2025-2).

For this Series 2025-1 issuance of cat bonds under Bluebonnet Re, TWIA is seeking $375 million or more in Texas named storm and severe thunderstorm reinsurance on a fully-collateralized basis.

Bluebonnet Re Ltd. will issue three tranches of Series 2025-1 notes that will be sold to investors and the proceeds be used to support the collateral needs of the reinsurance agreements to protect TWIA.

Like other TWIA-sponsored catastrophe bonds, global reinsurance firm Hannover Re is set to act as the ceding reinsurer to front the capital markets through a retrocession arrangement, we understand, while TWIA will be the reinsured party.

At least $375 million in reinsurance protection is being sought across the three tranches of Series 2025-1 notes that Bluebonnet Re will issue.

All three tranches will provide TWIA with reinsurance against Texas named storms and severe thunderstorms, on an indemnity trigger and annual aggregate basis, the same as its previous cat bonds under the Alamo Re vehicle have provided the insurer.

The reinsurance protection will run across three annual aggregate risk periods, running to maturity in June 2028, while we understand there is an aggregate event deductible in force for loss events to qualify.

A $150 million Class A tranche of notes would cover TWIA for losses from an attachment of $4.8 billion to $6.2 billion, giving the notes an initial attachment probability of 2.19% and an initial expected loss of 1.84%. These notes are being offered with spread price guidance of 6.5% to 7.25%, sources said.

An also $150 million Class B tranche of notes will cover TWIA for losses from an attachment of $3 billion to $3.8 billion, giving the notes an initial attachment probability of 3.67% and an initial expected loss of 3.18%. These notes are being offered with spread price guidance of 9% to 10%, we’re told.

The final $75 million Class C tranche of notes will cover TWIA for losses from an attachment of $2 billion to $3 billion, giving the notes an initial attachment probability of 5.5% and an initial expected loss of 4.5%, so are the riskiest and lowest down layer. These notes are being offered with spread price guidance of 11% to 12%, we understand.

Update 1:

The Texas Windstorm Insurance Association (TWIA) is now aiming to upsize its new Bluebonnet Re Ltd. (Series 2025-1) catastrophe bond issuance to as much as $500 million.

What was a $150 million Class A tranche of notes are now targeted to be $200 million in size and their price guidance has been revised to a range of 5.75% to 6.5%.

What was a $150 million Class B tranche of notes are also now targeting $200 million of protection for TWIA and their price guidance has now been revised to a range of 8.5% to 9%.

The final originally $75 million Class C tranche of notes are now targeted at between $90 million and $100 million in size and their price guidance has now been revised to a new range of 11.5% to 12%, sources said.

Update 2:

We understand that the size of this Bluebonnet Re Ltd. (Series 2025-1) catastrophe bond issuance increased again for TWIA, with $550 million in reinsurance limit secured at pricing of the deal.

The Class A notes have increased in size to now $250 million, while their pricing was finalised at the low-end of the reduced range at 5.75%.

The Class B notes remain at $200 million in size, while their pricing has also been finalised at the low-end of revised guidance at 8.5%.

The Class C notes are set to finalise at the upsized $100 million, while their pricing has been finalised at 11.75%, so in the upper-half of initial guidance.