Six repeat sponsors re-entered the market in the three months ending March 31, each issuing either replacement coverage or additional limit in advance of the North Atlantic wind season. Many of the repeat sponsors sought to continue to take advantage of attractive pricing as demonstrated by Catlin’s Galileo Re Ltd. Series 2015-1 Notes. This particular transaction was Catlin’s second catastrophe bond issuance through the Galileo Re Ltd. catastrophe bond facility and fifth overall 144A catastrophe bond issuance, with the 2015-1 tranche sitting below the outstanding Series 2013-1 layer. The 2015-1 Notes demonstrate that investors continue to show an interest in high risk/higher yielding products as the initial risk interest spread on the Galileo Re Series 2015-1 Notes is 13.50 percent with a modeled annual expected loss of 8.60 percent on a sensitivity basis - based on AIR risk analysis.
The market continued to show acceptance of structural innovation evidenced by Chubb’s East Lane Re VI Series 2015-1 transaction. Chubb’s seventh catastrophe bond issuance provided the insurer with five years of protection, a duration that is considered higher than average in the 144A P&C catastrophe bond market. This feature is becoming increasingly prevalent as it allows sponsors to lock in multi-year rates, amortize transaction expenses over a longer term and investors to diversify their own maturity schedules. The East Lane VI Series 2015-1 Notes provide coverage for several non-modeled perils for the first time, including meteorite impact, volcanic impact and wildfire, in addition to previously covered perils of Named Storm, earthquake, severe thunderstorm and winter storm. The bond upsized from USD225 million to USD250 million and priced at the midpoint of the expected range.
Other repeat issuers in the first quarter included SCOR via Atlas IX Capital Ltd. Series 2015-1; State Farm via Merna Re Ltd. Series 2015-1; Munich Re via Queen Street X Ltd. Series 2015-1 and Tokio Marine via Kizuna Re II Ltd. Series 2015-1.
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