The Texas Windstorm Insurance Association (TWIA) has now secured double its initial target for reinsurance from its new 144a Alamo Re Ltd. (Series 2023-1) catastrophe bond, with the issuance having its pricing fixed at $500 million in size, with a spread around 7% lower than the mid-point of initial guidance.
It’s a strong result in the catastrophe bond market for the residual market property insurer for the state of Texas, which had previously been concerned about the pricing available in the cat bond market, but in the end has opted to upsize this latest Alamo Re issuance by 100%.
TWIA returned to the catastrophe bond market around the middle of March, with a dual-series offering of both 144a notes and Section 4(A)2 notes that were pitched as an exchange opportunity for investors in a previous Alamo cat bond deal.
But the insurer opted to only pursue the issuance of Alamo Re Series 2023-1 144a notes and lifted the target size from its initial $250 million, to between $350 million and $450 million, as we reported in an update last week.
Then, as we reported yesterday, TWIA lifted its target to between $450 million and $500 million for the issuance, while at the same time the spread pricing guidance was lowered.
Now, we’ve been told the deal has successfully been priced for TWIA, at the doubled $500 million in size and at the lowest-end of the reduced price guidance range.
So, with this new Alamo Re 2023-1 catastrophe bond, TWIA will now benefit from a $500 million source of reinsurance protection, via fronting partner Hannover Re, with the coverage structured on an indemnity trigger and annual aggregate basis to provide Texas named storm and severe thunderstorm cover, across a three-year term running from June 1st.
The $500 million of notes being issued would attach after 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.
The notes have an initial base expected loss of 2.05% and were first offered to investors with price guidance in a range from 9.5% to 10.5%.
That price guidance was then reduced, to between 8.5% to 8.75% and we’re told have been priced at the low-end of that already reduced range, to pay investors a spread of 8.5%.
This is a strong result for TWIA in the cat bond market, with its new Alamo Re 2023-1 cat bond set to more than replace the $400 million Alamo cat bond that matures this year.
Doubling the size of this cat bond during the issuance process, presumably as TWIA found market conditions more favourable than anticipated, will help to take some pressure off its large reinsurance renewal needs this year.
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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