The Texas Windstorm Insurance Association’s (TWIA) first catastrophe bond, the $400m Texas named storm Alamo Re Ltd. (Series 2014-1) cat bond, has priced at the lowest end of the reduced and narrowed coupon guidance.
TWIA will be delighted with the success of its first venture into the catastrophe bond market. After three years of discussions about the potential use of catastrophe bonds as part of its reinsurance renewal, the TWIA board finally approved the issuance of a cat bond in 2014, hoping to take advantage of keener terms and pricing to expand its reinsurance programme.
TWIA’s Alamo Re Ltd. cat bond launched at $300m in size, but soon after grew to meet TWIA’s stated target of $400m of multi-year annual aggregate reinsurance protection against losses from Texas named storms.
Having achieved the target size the focus now turns to the pricing for the Alamo Re cat bond. The Alamo Re cat bond launched with coupon guidance of 6.5% to 7%, which in our last update on the deal had been lowered to a range of 6.35% to 6.5%, demonstrating investor demand for the issue
Now, at final pricing which we understand to have been set yesterday, the Alamo Re cat bond has priced at the low-end of the reduced range, to offer its investors a coupon of 6.35%.
TWIA’s first cat bond is scheduled to complete next week, so will count towards first-half issuance figures for 2014.