TWIA completes $700m cat bond
The Texas Windstorm Insurance Association (TWIA) has closed a $700 million catastrophe bond hedging its exposure to tropical cyclone risks.
This is the largest 144A catastrophe bond completed to date in 2015 and the second time that TWIA has utilised the cat bond market to manage its tropical cyclone risks, using Hannover Re to bring the cat bond to market.
Alamo Re will seek to issue two tranches of notes on an annual aggregate basis using an indemnity trigger. The notes will be used to cover insured property losses caused by named storms causing at least $50 million in losses, within the 14 first-tier, coastal counties of Texas (and a small portion of Harris County).
The Class A notes will cover TWIA for three years, while the Class B notes will cover for four years. Class A notes were sized at $300 million while the Class B notes were sized at $400 million.
The notes are positioned below and above, respectively, the Series 2014-1 catastrophe bonds which remain outstanding after being issued in 2014 and provide risk transfer protection for two further hurricane seasons.
With the combined Series 2014-1 and 2015-1 catastrophe bonds outstanding, TWIA has obtained a total of $1.1 billion of catastrophe bond-based protection, which makes it the fourth largest P&C catastrophe bond sponsor based on capacity outstanding as of May 15, 2015.
GC Securities served as sole structurer and sole bookrunner.
John Polak, general manager of TWIA, said: “The use of catastrophe bonds has been instrumental for TWIA to achieve our goal of funding to our 100-year PML. Catastrophe bonds have allowed us to manage the overall costs of our risk transfer program, diversify our counterparties, and manage our counterparty credit risk.
“We appreciate the coordinated efforts of Guy Carpenter and GC Securities to holistically evaluate all sources of capacity. Our partnership with Guy Carpenter and GC Securities has resulted in a cost-effective program that best combines traditional reinsurance, collateralised reinsurance, and catastrophe bond capacity. We value our stable partnership with Hannover Rück SE to facilitate our access to catastrophe bond capacity.”
