TWIA’s cat bond target set at $185m, with pricing within upper-guidance

The Texas Windstorm Insurance Association (TWIA) has now set the target size for its new catastrophe bond at $185 million, while pricing guidance for the Alamo Re Ltd. (Series 2022-1) cat bond has narrowed towards the upper-end of the range.

TWIA returned to the catastrophe bond market earlier in May, aiming to secure at least $185 million of reinsurance from the new Alamo Re Series 2022-1 issuance.

The new cat bond will provide TWIA with multi-year reinsurance protection against losses from named storms and severe thunderstorms in Texas, with global reinsurance firm Hannover Re acting as the ceding reinsurer to support the issuance.

We’re now told the size target has been fixed at the initial $185 million, so the Series 2022-1 Class A notes will provide TWIA with $185 million of three-year duration reinsurance protection against losses from named storms and severe thunderstorms in the state of Texas, on an indemnity trigger and annual aggregate basis.

The Class A notes attach at $2.2 billion of losses to TWIA, after a $50 million event deductible, covering a share of losses up to detachment at $2.843 billion, which gives the notes an initial expected loss of 2.51% at the base case.

The notes were first offered to cat bond investors with price guidance in a range from 6.75% to 7.25%, but we’re now told by sources that price guidance has narrowed towards the upper-end, with the final marketing being at between a 7% and 7.25% coupon.

Which, if it prices within the initial guidance, will be a positive result for TWIA, at a time when so many other catastrophe bonds are pricing above and in some cases well-above, their initial targeted price range.