The Texas Windstorm Insurance Association (TWIA) has upsized its reinsurance target to as much as $450 million for its latest venture to the catastrophe bond market, focusing solely on the 144a cat bond notes through an Alamo Re Ltd. (Series 2023-1) issuance.
TWIA returned to the catastrophe bond market around the middle of March, adopting an interesting approach of testing cat bond investor appetite for different forms of securities with its latest Alamo Re deal.
The residual market insurer for Texas was seemingly looking to maximise the opportunity in the cat bond market, through an offering of a dual-series issuance of Alamo Re Ltd. notes, a Rule 144a cat bond securities Series 2023-1 and Section 4(A)2 cat bond securities in Series 2023-2.
The Rule 144a securities have seemingly won out, as we understand that the Series 2023-2 Section 4(A)2 notes will now no longer be issued.
The Section 4(A)2 notes had been pitched as an exchange opportunity for investors wanting to roll out of a legacy Alamo cat bond into the new one.
The original target for this Alamo Re cat bond issuance had been for $250 million or more in reinsurance protection for TWIA.
But we’re now told the target has been lifted, with between $350 million and $450 million of Series 2023-1 144a Class A notes now expected to be issued.
The issued notes will provide TWIA with reinsurance protection for Texas named storms and severe thunderstorms, on an indemnity trigger and annual aggregate basis, across a three-year term running from June 1st.
The Series 2023-1 notes will have an attachment point at a loss of $2.965 billion to TWIA, we understand and cover a share of losses up to exhaustion at $4.508 billion, with a $50 million per-event minimum loss needed for an event to qualify.
These Series 2023-1 Class A notes come with initial attachment probabilities of 2.58%, an initial base expected loss of 2.05% and were first offered to cat bond investors with price guidance in a range from 9.5% to 10.5%.
We’re now told that the $350 million to as much as $450 million of notes have updated price guidance now in a range of 8.75% to 9.5%, indicating the continued softening of the cat bond market at this stage of the year.
It’s perhaps no surprise the 144a notes won out, as typically Section 4(A)2 securities issuances of insurance-linked securities (ILS) are more private and smaller.
With the major cat bond funds and investors having new money to deploy, in many cases, the majority will be seeking 144a notes in preference to more private deals, or structures, so this has clearly provided an opportunity to TWIA to maximise its latest trip to the cat bond market and it will be interesting to see how large this Alamo Re 2023-1 cat bond becomes.
Read all about this new Alamo Re Ltd. (Series 2023-1) catastrophe bond from the Texas Windstorm Insurance Association and every other cat bond transaction in the Artemis Deal Directory.
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