Tower Hill targets improved execution for up to $400m Winston Re cat bond

We’re told that Florida homeowners and commercial property insurance underwriter, the Tower Hill Insurance Exchange, is now honing in on a strong execution for its debut Winston Re Ltd. (Series 2024-1) catastrophe bond issuance, with the size target narrowed and pricing looking improved.

Tower Hill Insurance Exchange ventured into the catastrophe bond market for the first time in January, with a goal to secure $200 million or more in Florida named storm reinsurance from its debut cat bond sponsorship.

The company last 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.

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

Now, we’re told that size target has narrowed, with between $350 million and the upper end of $400 million being sought.

At the same time, the price guidance was fixed, although not yet finalised, and interestingly in the latest update the guidance for one tranche has reverted to a range, with lower pricing targeted for it.

Clearly, Tower Hill has experienced a positive investor response to its debut cat bond, with improved execution being sought.

Using a newly established Bermuda based company named Winston Re Ltd. Tower Hill’s debut catastrophe bond will see that structure issuing two tranches of notes, targeting from $350 million to $400 million of reinsurance protection against named storm losses in Florida for the insurer.

The 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.

What was a $100 million Class A tranche of notes were then updated to be pitched at between $225 million and $250 million in size, and we’re now told that the target for the Class A notes has been updated again to a fixed $250 million.

These Class A notes will have an initial expected loss of 1.56% and were first offered to investors with spread guidance in a range from 10% to 11%, which was then fixed at the next update at 10.75%, but we’re now told a range is on offer again of 10.25% to 10.75%, so a chance of improved execution and lower pricing for the sponsor.

What was a $100 million Class B tranche of notes continue to be offered at from $100 million to $150 million in size.

These are riskier, set to sit beneath the Class A’s, having an initial expected loss of 1.97% and these notes were first offered to investors with spread guidance in a range from 11.75% to 12.75%, and at the latest update the pricing remains fixed at the lower-end of 11.75%.

As we said before, this execution looks likely to send a strong signal to Florida reinsurance cedents that the capital markets is open and willing to take on their named storm risk, 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.