The Texas Windstorm Insurance Association (TWIA) has completed a $400 million catastrophe bond hedging its exposure to tropical cyclone risks.
This is the first time that the TWIA has utilised the cat bond market to manage its tropical cyclone risks.
Hannover Re acted as the transformer reinsurer facilitating TWIA’s access to catastrophe bond-based risk transfer capacity. GC Securities was responsible for structuring and placing of this catastrophe bond, which matures in approximately three years.
The bonds are positioned alongside the TWIA’s traditional reinsurance programme to provide annual aggregate protection from tropical storms causing at least $50 million loss to the TWIA.
Ulrich Wallin, chief executive officer of Hannover Re, said: "With this transaction Hannover Re has underscored its long-standing expertise in the field of alternative risk transfer and leveraged the opportunity to generate low-risk and stable margins.”
John Polak, general manager of TWIA, said: “TWIA appreciates the assistance of GC Securities and Hannover Re in successfully placing our first catastrophe bond. This transaction is another step forward towards our overall funding goals and demonstrates our ongoing commitment to provide financial security to our Texas policyholders.”
David Priebe, vice chairman of Guy Carpenter, added: “This transaction exemplifies the benefit of the convergence between the insurance, reinsurance and capital markets and demonstrates the value that TWIA achieved in partnering GC Securities, Guy Carpenter’s broking team and Hannover Re to deliver a solution best meeting TWIA’s risk transfer needs.
“Having pioneered the application of catastrophe bonds for residual market insurers, the successful execution of Alamo Re demonstrates our commitment, expertise and industry leading position in providing capital markets-based risk transfer solutions to residual market insurers and other public entity clients.”
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TWIA, North America, GC Securities, Hannover Re, Cat Bonds