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Catastrophe bonds cover Texas tropical storm risks


GC Securities has placed $700 million in catastrophe bonds to protect against tropical storms in Texas, the Guy Carpenter & Co. L.L.C. unit said Wednesday.

Alamo Re Ltd. Series 2015-1 will provide the Texas Windstorm Insurance Association with annual aggregate protection from tropical storms causing at least $50 million in losses to the association, GC Securities said in a statement.

The $300 million in Series 2015-1 Class A notes will provide three years of risk-transfer protection, while the $400 million in Series 2015-1 Class B notes will provide four years of risk-transfer protection, according to the statement.

This is the second time the association has tapped the capital markets.

The new notes are positioned in tranches 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, the statement said.

“The structure of the Alamo Re shelf program allowed TWIA to access additional catastrophe bond capacity more quickly while incurring lower transaction expenses as a subsequent issuance,” Cory Anger, global head of ILS structuring for GC Securities, said in the statement.

“The use of catastrophe bonds has been instrumental for TWIA to achieve our goal of funding to our 100-year (probable maximum loss). Catastrophe bonds have allowed us to manage the overall costs of our risk transfer program, diversify our counterparties, and manage our counterparty credit risk,” John Polak, general manager of the Texas Windstorm Insurance Association, said in the statement.

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