Bluebonnet Re Ltd. (Series 2025-2)

This is the first catastrophe bond to benefit the Texas FAIR Plan Association (TFPA), which was established in 1995 to provide coverage to residential properties that are denied by other insurance carriers.

The Texas FAIR Plan Association is managed by the Texas Windstorm Insurance Association (TWIA) and this debut catastrophe bond for the Texas FAIR Plan has come to market at the same time as one for TWIA.

For 2025, a new Bermuda based issuing structure named Bluebonnet Re Ltd. is being used for this Texas FAIR Plan Series 2025-2 cat bond, while TWIA is also sponsoring a Series 2025-1 issuance.

For this Series 2025-2 issuance of cat bonds under Bluebonnet Re, the Texas FAIR Plan is seeking $200 million or more in Texas named storm, severe thunderstorm and wildfire reinsurance on a fully-collateralized basis.

Bluebonnet Re Ltd. is a recently registered Bermuda-based vehicle and it will issue a single tranche of Series 2025-2 notes that will be sold to investors and the proceeds be used to support the collateral needs of the reinsurance agreements to protect the Texas FAIR Plan Association (TFPA).

Similar to cat bonds issued to benefit TWIA, we understand that global reinsurance firm Hannover Re will act as the ceding reinsurer to front the capital markets through a retrocession agreement, then entering into a reinsurance agreement with TFPA to protect that entity and cascade the cat bond investor backed protection to it.

From its debut Bluebonnet Re Series 2025-2 catastrophe bond, the TFPA is targeting at least $200 million in multi-year and fully-collateralized reinsurance from the capital markets.

We’re told that the notes will provide TFPA with reinsurance to protect it against losses from named storms, severe thunderstorms and wildfires in the State of Texas.

This protection will be afforded on an indemnity trigger and per-occurrence basis, running across a two-year term to early June 2027, we understand.

The $200 million or greater in Bluebonnet Re Series 2025-2 Class A catastrophe bond notes would attach their coverage after the TFPA suffers a loss of $180 million or greater, covering a share up to $500 million.

The Class A notes come with an initial attachment probability of 6.44%, an initial expected loss of 4.07% and sources said they are being offered to catastrophe bond funds and investors with spread price guidance in a range from 11% to 12%.

This is the first time a catastrophe bond will cover the Texas FAIR Plan Association’s exposures, having not been incorporated into any of TWIA’s previous cat bond issues as far as we’re aware.

Update 1:

We understand that the size target for this first catastrophe bond for the Texas FAIR Plan remains unchanged, with still $200 million of reinsurance sought through this Bluebonnet Re 2025-2 issuance.

We’re told the price guidance for the Class A notes has now been revised to the upper-end of the initial range at 12%.

Update 2:

We’re now told that this first catastrophe bond for the Texas FAIR Plan has been finalised to provide the targeted $200 million of reinsurance from the Bluebonnet Re 2025-2 issuance of notes.

The Bluebonnet Re Series 2025-2 Class A notes have now been priced to pay investors a spread of 12%, so at the upper-end of the initial guidance range.