TWIA lifts target for new Alamo Re cat bond again to $1.4bn

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The Texas Windstorm Insurance Association (TWIA) has for a second time lifted the target size of its new Alamo Re Ltd. (Series 2024-1) catastrophe bond, with the residual market insurer now aiming to secure $1.4 billion of reinsurance from the capital markets with this deal.

TWIA returned to the catastrophe bond market around the middle of March, seeking $600 million in collateralized catastrophe reinsurance from what will be its tenth Alamo Re cat bond since 2014.

As we then reported, the target size for this Alamo Re 2024-1 cat bond had doubled to $1.2 billion, while the pricing guidance was revised downwards.

Now, we’re told by sources that the target size has increased again, with TWIA now aiming to secure $1.4 billion of reinsurance protection through this catastrophe bond deal.

Read about every one of the Texas Windstorm Insurance Association (TWIA)’s catastrophe bonds in our Deal Directory.

Recall that, for 2024, TWIA needs to purchase the largest reinsurance tower in its history, as exposure growth and inflation drove its need for reinsurance higher, with a target set to have just over $4 billion in reinsurance limit in-force for the 2024 wind season.

Alamo Re Ltd., the Bermuda based special purpose insurer undertaking TWIA’s cat bond issuances, is still targeting issuance of three tranches of Series 2024-1 notes for this cat bond, but with now $1.4 billion of reinsurance coverage to be spread across them.

The targeted $1.4 billion of reinsurance protection from each tranche will cover TIWA for certain losses from Texas named storms and severe thunderstorms, on an indemnity trigger and annual aggregate basis, the same as previous Alamo Re cat bonds.

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Two of the tranches of notes, Classes A and B, are set to provide three years of cover from June 1st to the end of May 2027, while the third Class C tranche will only cover two years from June 1st to the end of May 2026.

All three tranches of notes require loss events to exceed $50 million in cost to TWIA, for the event to be considered covered under the aggregate coverage.

What was originally a $300 million Class A tranche of notes remain at their updated target size of $500 million, we understand.

The Class A notes initial expected loss is 1.42% and they were first offered with spread price guidance of 6.5% to 7.5%, which was then narrowed and lowered to 6.5% to 7% and we’re now told has been lowered again to 6% to 6.5%.

What was originally a $100 million Class B tranche of notes were then updated to be triple that size at $300 million, but we’re now told have grown even further and are targeted to be a $500 million tranche now.

The Class B notes have an initial expected loss of 1.96% and were initially offered with spread price guidance of 7.5% to 8.5%, which was then narrowed and lowered to 7.5% to 8% and we’re now told has been fixed at 7.75%, so still within the initial guidance range.

The final Class C tranche of notes (so the two year tranche) were first targeted to be $200 million in size, but that was doubled to $400 million which is where this layer stays, we understand.

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The Class C notes have an initial expected loss of 3.29% and were first offered with spread price guidance of 11% to 12%, which was then narrowed and lowered to 11% to 11.5% and we’re now told has been fixed at 11.25%.

All in, this looks like an exceptionally strong execution for TWIA in the catastrophe bond market, with now more than double the initial target size likely to be issued, while pricing has dropped for all tranches, into the lower-half of initial ranges at least.

At $1.4 billion, this catastrophe bond will be second in size only to Florida Citizens’ $1.5 billion Everglades Re issuance from 2014.

Read all about this new Alamo Re Ltd. (Series 2024-1) catastrophe bond from the Texas Windstorm Insurance Association and every other cat bond transaction in the Artemis Deal Directory.

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