Texas Windstorm Association Initiates Major Reinsurance Push With $600M Catastrophe Bond

In a significant move to fortify its reinsurance shield, the Texas Windstorm Insurance Association (TWIA) is approaching the catastrophe bond market again. Its target this time is a hefty $600 million Alamo Re Ltd. (Series 2024-1) bond.

According to a report published by Artemis on March 12, the Texas residual market property insurer is keen on expanding its reinsurance business in the coming years. The push includes issuing a $600 million bond, propelling TWIA’s intent to lock in a more than $4 billion reinsurance limit for the 2024 wind season.

This ambitious target signals a significant leap from the $2.24 billion reinsurance limit established in 2023. The move aligns with expectations as the issuance of a large catastrophe bond underscores TWIA’s enthusiasm to leverage the opportunities presented by capital markets this year.

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Global reinsurer Hannover Re is expected to reassume the position of ceding reinsurer, facilitating the participation of capital markets. Alamo Re Ltd., a Bermuda-based special purpose insurer, is set to dispense three tranches of Series 2024-1 notes to supply at least $600 million of reinsurance coverage for TWIA.

The achieved reinsurance protection will shield against named storms and severe thunderstorms in Texas that exceed a loss of $50 million to TWIA.

The magnitude of the catastrophe bond from TWIA marks one of the largest of this year, suggesting a growing influence of capital markets in the reinsurance industry.

With extreme weather incidents increasingly frequent and intense because of climate change, maintaining high reinsurance limits is crucial for insurers. TWIA’s move to secure such a large catastrophe bond indicates a necessary adaptive measure. 

This significant step also illustrates the growing influence of capital markets in the reinsurance landscape. Shenanigans like these potentially signal a significant shift in the dynamics of the reinsurance industry as a whole in the coming years.

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