USAA are aiming to achieve $200m of fully collateralized cover through the issuance of their latest catastrophe bond, Residential Reinsurance 2012 Ltd. It’s USAA’s eighteenth cat bond and see’s the regular sponsor attempt to secure another multi-year source of multi-peril capital markets cover. When it began marketing the deals size was not publicised as one tranche of notes were higher risk and not rated, now sources have told us that the total deal size is likely to be $200m.
Residential Re 2012 is a three tranche cat bond designed to provide USAA with cover for U.S. hurricane, U.S. earthquake, U.S. severe thunderstorm, U.S. winter storm and U.S. wildfire risks, on both per-occurrence and aggregate basis using indemnity triggers. The deal will provide cover for four years until May 2016.
When it began marketing we knew that the Class 3 tranche of notes were sized at $50m provided per-occurrence coverage for the five perils, the Class 5 tranche of notes were sized at $100m and provided cover on an annual aggregate basis and the Class 7 tranche of notes providing cover on an annual aggregate basis for all perils had not been sized.
Now according to our sources we can tell you that the Class 3 tranche will be $50m, the Class 5 tranche has grown slightly to $110m and the Class 7 tranche of notes will be $40m, making the overall deal size $200m.
We’ve also been told what coupon the tranches of cat bond notes will pay to investors. The Class 3, per-occurrence notes will attach at $2 billion of losses, exhaust at $2.8 billion and will pay a coupon of 10% above Treasury money market yields. The Class 5 tranche of annual aggregate notes attach at $1.571 billion of losses, exhaust at $1.975 billion and will pay a coupon of 8%. The Class 7 annual aggregate notes attach at $900m, exhaust at $1.05 billion and will pay a coupon of 22% given their much riskier profile.
We’ll update you once the deal completes which is expected to be before the end of the month. As ever you can read full details on Residential Reinsurance 2012 Ltd., and every other cat bond, in our catastrophe bond Deal Directory.
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