TWIA Returns For $ 250 Million + Alamo Re Cat Bond Renewal For 2021
The Texas Windstorm Insurance Association (TWIA) returned to the catastrophe bond market with a transaction of $ 250 million or more with Alamo Re Ltd. cat bond from 2018.
For 2021, the Texas Windstorm Insurance Association (TWIA) returned to Bermuda to host this catastrophe bond issue, after venturing to Singapore for its only cat bond of 2020.
The Texas state market’s residual real estate insurer has now sponsored six catastrophe bonds, with this 2021 Alamo Re issue slated to be the seventh company.
In total, the six previously sponsored cat bonds provided TWIA with $ 2.5 billion in fully guaranteed reinsurance in financial markets.
For 2021, as mentioned, we understand that TWIA has returned to its Bermuda-domiciled Specialty Insurer (SPI) Alamo Re Ltd.
For this new cat bond, TWIA is seeking at least $ 250 million in fully guaranteed, multi-year reinsurance protection against losses caused by named storms and severe thunderstorms in Texas.
This will at least partially replace TWIA’s $ 400 million Alamo Re 2018-1 cat bond transaction maturing in July. But it should be noted that there is a lot of room for this new chat obligation to increase, if prices and market conditions allow.
As with all of TWIA’s catastrophe bonds to date, we are told that TWIA uses the services of global reinsurance company Hannover Re as the ceding reinsurer, while TWIA is the reinsured party.
Hannover Re will therefore face the SPI, concluding retrocessional reinsurance agreements with it, while concluding reinsurance agreements with TWIA to pass on the coverage.
SPI, Alamo Re Ltd., will offer investors a one-time tranche, currently $ 250 million, of Class A notes, with the proceeds from their sale being used to secure retroactive agreements with reinsurer Hannover Re.
The $ 250 million in notes will ultimately provide TWIA with a three-year source of comprehensive annual reinsurance protection and triggered indemnity, covering losses caused by designated storms and severe thunderstorms in Texas.
To qualify, a named storm or severe thunderstorm must drive TWIA at least $ 50 million from UNL, according to sources, with an aggregation of qualifying losses over three consecutive one-year risk periods beginning June 1.
We’re told Alamo Re 2021-1 Class A tickets will cover a large layer of TWIA’s reinsurance tower, with $ 2.1 billion in losses and up to $ 4.03 billion initially.
This gives the currently $ 250 million notes an initial expected loss of 1.76%, while the notes are offered to investors in cat bonds with price indications between 4% and 4.75%, we are told. .
By comparison, TWIA’s Alamo Re 2019-1 chat bond saw an expected initial loss of 1.8% and a price of 4.5%, while TWIA’s Alamo Re II Pte. The cat 2020-1 bond had an expected initial loss of 1.78% and a price of 5.75%, both of which also reported $ 2.1 billion in losses.
Which suggests that if the new 2021 Alamo Re cat bond follows the direction of other recent catalytic bond issuance and gets competitive prices, TWIA’s latest cat bond may in fact be offered more economically than the issuance. of 2020 and maybe comparable, or better, to its 2019. Chat bond contract.
You can read all about this new Alamo Re Ltd. catastrophe bond. (Series 2021-1) from the Texas Windstorm Insurance Association (TWIA) in our extensive directory of Artemis contracts.