Arch targets up to $ 150 million for retro cat bond Claveau Re

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Arch Capital Group, the specialist insurance and reinsurance company headquartered in Bermuda, aims to halve the size of its first real estate catastrophe bond focused on retrocession, with global property and casualty firm Claveau Re Ltd. (Series 2021-1) issue now targeting up to $ 150 million in corporate protection.

At the same time, sources tell us that price forecasts have been reduced to the lower end of the initially traded range, suggesting further strong execution for a real estate cat bond.

The Claveau Re operation is particularly interesting because it will cover a very wide range of global risks, thus demonstrating the use of the catastrophe bond to access the capacity of the capital markets, in the form of an industrial loss trigger, to ensure global retrocessional protection against industry-leading catastrophic risks.

At launch, when we first covered this cat bond almost a fortnight ago, Arch was seeking $ 100 million of catastrophe reinsurance retrocession protection from the capital markets, to cover its global reinsurance entity Arch. Reinsurance Ltd., its Ireland-based Arch Reinsurance DAC underwriting unit and its Lloyd’s management agency on behalf of the Syndicate 1955.

Now the company aims to get between $ 125 million and $ 150 million in coverage with this deal, we’re told, so a potential one-quarter increase if investor demand is there.

Given the high yielding nature of the Notes, we imagine Arch may not have too much trouble securing the additional $ 50 million of market capacity during this time of high investor demand.

The transaction will provide Arch with index-linked industry loss coverage against losses from the following risks over a four-year period: US and Canada named storm and earthquake; severe thunderstorm in the United States; forest fire in the United States; winter storm in the United States; Caribbean earthquake in the United States; typhoon and earthquake in Japan; Canada severe thunderstorm; winter storm in Canada; European windstorm; earthquake in Italy; earthquake in Turkey; earthquake in Australia; tropical cyclone in Australia; Earthquake in New Zealand.

We were told the notes would be attached once overall industry losses, after applicable franchise deductibles, hit $ 55 billion and coverage depleted to $ 77.5 billion.

The now up to $ 150 million tranche of Class A Notes issued by Claveau Re Ltd. will have an expected modeled initial loss of 7.18%.

At first, the notes were offered to investors in cat bonds with coupon price advice in the 17% to 17.75% range, but sources told us that the range of marketed price advice has been narrowed towards the low, between 17% and 17.25%. .

As we explained when we revealed this transaction, a single industrial loss guarantee (ILW) for all natural hazards in the United States with a trigger of $ 50 billion is expected to be around 18.5% to 20. % at present. This suggests that this comprehensive multi-risk hedging might actually be quite effective in terms of pricing once secured in the cat bond market.

This advantageous pricing can help incentivize other global reinsurance players to turn to catastrophe bonds for protection they might have previously obtained in the maintenance waste market or through other sources of on-lending. more traditional.

You can read everything about this first Claveau Re Ltd. (Series 2021-1) from Arch and all other Catastrophe Bond contracts in our Artemis Deal Directory.

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