Tower Hill secures Winston Re cat bond up 100% at $400m, with reduced pricing

Florida homeowner and commercial property insurance underwriter, the Tower Hill Insurance Exchange, has now secured the targeted doubling in size for its debut Winston Re Ltd. (Series 2024-1) catastrophe bond, with the issuance set to complete at the upper-end target of $400 million, while pricing proved to be below the initial mid-point of guidance.

The execution that Tower Hill has achieved with its first 144A catastrophe bond shows the appetite investors have for well-priced and structured Florida risk, sending a strong signal to potential sponsors of Florida wind focused cat bonds.

It could also tempt some Floridian insurers to venture into the cat bond market well in advance of the June reinsurance renewals, to take advantage of cat bond investor appetite and available capital given the strong maturity flow seen through the start of the year.

Tower Hill Insurance Exchange turned its head to the catastrophe bond market for the first time in January, aiming to close on at least $200 million in Florida named storm reinsurance from its debut cat bond sponsorship.

The company had previously renewed its catastrophe reinsurance tower at close to $2 billion in size at the mid-year of 2023, but has an appetite to add a cat bond, with the capital markets seen as a diversifying source of risk capital to complement its 2024 reinsurance renewal. Given the insurers’ growth as well, it’s possible the traditional reinsurance placement doesn’t shrink too much, with this cat bond now secured at the top of it.

As we subsequently reported, Tower Hill’s target for its Winston Re catastrophe bond rose significantly, with between $325 million and $400 million in reinsurance then being sought by the sponsor.

That size target was then narrowed, to a range of between $350 million and the upper end of $400 million being sought.

On pricing, at the first update the price guidance was fixed, although not yet finalised. Then, at the next update the guidance for one tranche was switched back to a range, with lower pricing targeted for it as Tower Hill responded to investor feedback and looked to secure the reinsurance at a more efficient cost.

Now, we understand from sources, that Tower Hill achieved both of its goals with this debut Winston Re 2024-1 catastrophe bond, securing the doubled target for $400 million of reinsurance limit from the issuance, while the pricing has settled at the lower ends of the revised guidance.

As a result, Bermuda based Winston Re Ltd. will issue two tranches of notes to provide $400 million of reinsurance protection against named storm losses in Florida for Tower Hill.

The now confirmed as $400 million of reinsurance protection from the Winston Re 2024-1 cat bond will be on an indemnity and per-occurrence basis, over a three hurricane season term, starting from June 2024 and with maturity due in February 2027.

The Class A tranche of notes more than doubled in size from the initial $100 million to reach $250 million in size.

The Class A notes have an initial expected loss of 1.56% and were first offered to investors with spread guidance in a range from 10% to 11%. That guidance was at first fixed at the next update at 10.75%, but then reverted back to a range of 10.25% to 10.75%, and we’re now told the spread was finalised at the low-end of updated guidance at 10.25% for these notes.

What was a $100 million Class B tranche of notes have now been finalised 50% bigger at $150 million in size.

These riskier Class B notes, that will sit beneath the Class A’s, come with an initial expected loss of 1.97% and were first offered to investors with spread guidance in a range from 11.75% to 12.75%. That Class B note pricing was fixed at the lower-end of 11.75%, which is where it remained.

Which is a strong result on both counts for Tower Hill, in securing more reinsurance than anticipated from its debut catastrophe bond deal, with pricing below the initial mid-points of guidance in both cases for the notes offered.

As we said, this will send a strong signal to Florida reinsurance cedents that the capital market is open and willing to take on their named storm risk in catastrophe bond form, at the right price.

You can read all about this Winston Re Ltd. (Series 2024-1) in the extensive Artemis Deal Directory that includes details on almost every cat bond ever issued.