Second Cat Bond Issuance Benefiting TWIA
GC Securities, a division of MMC Securities Corp., a U.S.
registered broker-dealer and member FINRA/NFA/SIPC, today announced
the placement of the Series 2015-1 Notes, with notional principal
of USD 700,000,000, through the existing catastrophe bond shelf
program, Alamo Re Ltd., to benefit the Texas Windstorm Insurance
Association (“TWIA”). This is the largest 144A catastrophe bond
completed to date in 2015 and the second time that TWIA has
utilized the cat bond market to manage its tropical cyclone
risks.
The two classes within the Series 2015-1 bonds are positioned
alongside TWIA’s traditional reinsurance program to provide annual
aggregate protection from tropical storms causing at least USD 50
million in losses to TWIA. The Series 2015-1 Class A Notes provide
three years of risk transfer protection while the Series 2015-1
Class B Notes provide four years of risk transfer protection.
Additionally, they 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.
The three tranches of catastrophe bonds have been designed to
manage the amount of catastrophe bond capacity maturing at any
point of time. This mitigates the refinancing risk associated with
such capacity upon its maturity. With the combined Series 2014-1
and 2015-1 catastrophe bonds outstanding, TWIA has obtained a total
of USD 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.
Hannover Rück SE serves as the transformer reinsurer facilitating
TWIA’s access to catastrophe bond-based risk transfer capacity.
RISK PROFILE
Series 2015-1Notes
Size Fitch Rating
ExpectedMaturity
Coupon Class A Notes $300,000,000 B+ sf
June 7, 2018
TMM earnings + 5.90%
Class B Notes $400,000,000 BB- sf June 7, 2019
TMM earnings + 4.60%
QUOTES
John Polak, General Manager, Texas Windstorm Insurance
Association
“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, collateralized reinsurance, and catastrophe bond
capacity. We value our stable partnership with Hannover Rück SE to
facilitate our access to catastrophe bond capacity.”
Ulrich Wallin, CEO of Hannover Re
“We are delighted that TWIA has used its cat bond program
‘Alamo’ for the second time and has again trusted Hannover Re to
help manage their cat bond process in a professional and efficient
manner alongside GC Securities. It has been a pleasure for us being
part of the successful transaction team.”
David Priebe, Vice Chairman of Guy Carpenter
“The successful execution of the second Alamo Re catastrophe
bond demonstrates Guy Carpenter’s and GC Securities’ continued
commitment, expertise and industry-leading position in providing
capital markets-based risk transfer solutions to residual market
insurers and other public entity clients. Alamo Re exemplifies the
benefit of the convergence between the reinsurance and capital
markets and demonstrates the ongoing value that TWIA received from
GC Securities, Guy Carpenter and Hannover Re, all of whom delivered
a solution specifically tailored to meet TWIA’s risk transfer
needs.”
Cory Anger, Global Head of ILS Structuring, GC
Securities
“We are honored to have facilitated TWIA’s second catastrophe
bond transaction and cost effectively contributed to bringing TWIA
to its stated 1-in-100 year funding goal within its budget. 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. Additionally,
being mindful of financing risk associated with maturing
catastrophe bonds, we designed the interaction of the Series 2014-1
Notes and the Series 2015-1 Notes to not only achieve combined
results for TWIA in 2015 but also to manage duration risk to TWIA
as each class within the respective series matures. We also
designed the three tranches to interact seamlessly with each other.
This approach provides flexibility to TWIA depending upon its needs
to adjust the layering of such risk transfer capacity relative to
the prior year’s results/impact to TWIA’s capital base or TWIA’s
changing exposures.”
Chi Hum, Global Head of ILS Distribution, GC
Securities
“GC Securities is pleased to have been selected by TWIA to work
with the Guy Carpenter broker team to develop investor support for
the USD 700 million Alamo Re Ltd. Series 2015-1 cat bond
issuance. Recognizing TWIA’s continuing presence in the
cat bond market and the goals of optimizing the proper mix of
capacity sourcing and pricing of a well-structured reinsurance
program, the investors responded with significant interest for the
transaction and more broadly, with support for TWIA on a
going-forward basis. The successful execution of this cat bond
is the direct result of an organized and deliberate effort on the
part of TWIA to communicate their story to the investor base. We
are pleased to have been a part of this strategy.”
TAGS/KEYWORDS
Guy Carpenter, GC Securities, Alamo Re, catastrophe bond, cat
bond, Texas Windstorm Insurance Association, TWIA, Hannover Rück
SE, Polak, Priebe, Anger, Hum, Wallin
About Guy Carpenter
Guy Carpenter & Company, LLC is a global leader in providing
risk and reinsurance intermediary services. With over 50 offices
worldwide, Guy Carpenter creates and executes reinsurance solutions
and delivers capital market solutions* for clients across the
globe. The firm’s full breadth of services includes
line-of-business expertise in agriculture; aviation; casualty
clash; construction and engineering; cyber solutions; excess and
umbrella; excess and surplus lines; healthcare & life; marine
and energy; mutual insurance companies; political risk and trade
credit; professional liability; property; public sector;
retrocessional reinsurance; surety; terrorism and workers
compensation. GC Fac® is Guy Carpenter’s dedicated global
facultative reinsurance unit that provides placement strategies,
timely market access and centralized management of facultative
reinsurance solutions. In addition, GC Analytics®** utilizes
industry-leading quantitative skills and modelling tools that
optimize the reinsurance decision-making process and help make the
firm’s clients more successful. For more information, visit
www.guycarp.com and follow Guy Carpenter on Twitter
@GuyCarpenter.
Guy Carpenter is a wholly owned subsidiary of Marsh &
McLennan Companies (NYSE:MMC), a global professional services firm
offering clients advice and solutions in the areas of risk,
strategy, and people. With annual revenue of $13 billion, Marsh
& McLennan’s 57,000 colleagues worldwide provide analysis,
advice, and transactional capabilities to clients in more than 130
countries through: Marsh, a leader in
insurance broking and risk management; Mercer, a leader in talent, health, retirement, and
investment consulting; and Oliver Wyman, a leader in management consulting. Marsh &
McLennan is committed to being a responsible corporate citizen and
making a positive impact in the communities in which it operates.
Visit www.mmc.com for more information.
*Securities or investments, as applicable, are offered in the
United States through GC Securities, a division of MMC Securities
Corp., a US registered broker-dealer and member FINRA/NFA/SIPC.
Main Office: 1166 Avenue of the Americas, New York, NY 10036.
Phone: (212) 345-5000. Securities or investments, as applicable,
are offered in the European Union by GC Securities, a division of
MMC Securities (Europe) Ltd. (MMCSEL), which is authorized and
regulated by the Financial Conduct Authority, main office 25 The
North Colonnade, Canary Wharf, London E14 5HS. Reinsurance products
are placed through qualified affiliates of Guy Carpenter &
Company, LLC. MMC Securities Corp., MMC Securities (Europe) Ltd.
and Guy Carpenter & Company, LLC are affiliates owned by Marsh
& McLennan Companies. This communication is not intended as an
offer to sell or a solicitation of any offer to buy any security,
financial instrument, reinsurance or insurance product. **GC
Analytics is a registered mark with the U.S. Patent and Trademark
Office.
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version on businesswire.com: http://www.businesswire.com/news/home/20150603005327/en/
Guy CarpenterMissy DeAngelis,
917-937-3118missy.deangelis@guycarp.comorJennifer Ainslie,
44.207.357.2058jennifer.ainslie@guycarp.com
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