Everglades Re Ltd. completes, rated and now largest ever catastrophe bond

by Artemis on May 1, 2012

The Everglades Re Ltd. catastrophe bond has now completed and has been settled successfully at a size of $750m making it officially the biggest catastrophe bond to ever hit the market. Everglades Re is special not only because it achieved this size, it is the first cat bond to be issued by sponsor Florida’s Citizens Property Insurance and it is going to contribute a sizeable portion of their reinsurance coverage, demonstrating that cat bonds can be price competitive and a major part of an insurers overall reinsurance provision.

The transaction was rated by Standard & Poor’s yesterday, with the single tranche of $750m Series 2012-1 Class A notes issued by Everglades Re Ltd. receiving a ‘B+’ rating. The notes cover losses from Florida hurricanes on a per-occurrence basis and cover is for Citizens coastal account of insured personal and commercial residential properties.

Investors in Everglades Re will receive a sizeable coupon payment for taking on this risk for the Florida insurer, with the coupon set at 17.75%.

By achieving $750m of cover, Everglades Re has truly shown the attractiveness of cat bonds and the interest investors have in the market at this time. It’s one of the riskier cat bonds as it covers some of the most hurricane exposed areas of the U.S., but as investors become better informed and the cat bond market matures, that risk is clearly attractive at the right price and return levels. The completion of this deal marks a positive step in the evolution of this market.

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