Insurance and reinsurance group Amlin Plc is pleased with the additional reinsurance protection provided by its latest, and second, catastrophe bond transaction Tramline Re II Ltd. (Series 2013-1). The deal settled today after seeing the interest coupon offered drop to the low-end of the marketed range.
Tramline Re II provides Amlin’s reinsurer subsidiary Amlin AG with a multi-year source of fully-collateralized retrocessional and reinsurance protection for U.S. and Canadian earthquake risks, including fire following. Protection is on a per-occurrence basis and the cat bond uses an industry loss trigger with a state weighted PCS index for U.S. earthquake risks, while for the Canadian earthquake risks the PCS index will be weighted by province. The cover attaches at an index level of $325m and the cover provided runs for a four-year term.
The deal closed offering a single tranche of $75m Series 2013-1 Class A notes, Amlin didn’t take the opportunity to upsize this cat bond despite investors telling us that the chance would have been available had it so chosen. The marketed pricing on the deal began with an interest spread guidance range of 3.25% to 3.75%, which narrowed under marketing to 3.25% to 3.5%, and finally finished at 3.25% which is approximately 7% down from the original mid-point.
In a press release issued today, Amlin said; “This cover is in addition to the protection that Amlin purchases through the traditional reinsurance marketplace and provides significant risk transfer for a key exposure of the Group.”
Amlin continued; “The cover provided by the bond is based on market share factors applied to market industry losses as reported by PCS. As part of the transaction Amlin AG has entered into reinsurance agreement with Tramline Re II Limited which will issue to investors USD 75m of four year principal-at-risk variable rate notes. The proceeds of these notes will comprise the collateral for Tramline Re II Limited’s obligations to Amlin AG pursuant to the reinsurance agreement.”
It’s not just the reinsurer subsidiary, Amlin AG, which benefits from the protection, Amlin’s Lloyd’s Syndicate 2001 is also a beneficiary of enhanced reinsurance protection through this deal. Amlin explained; “Amlin’s Lloyd’s Syndicate 2001 will also benefit from the cover provided by the bond through a reinsurance arrangement with Amlin AG.”
Charles Philipps, chief executive of Amlin plc, commented; “The additional protection provided by this bond will complement the cover provided by our traditional reinsurance programme and Amlin’s existing three year catastrophe bond which incepted on 1 January 2012.”
It’s unlikely that this is the last we’ll see of Amlin in the catastrophe bond market. The complementary use of capital markets protection from cat bonds alongside its traditional reinsurance cover seems to suit the firm well.
Philipps continued; “We continue to see attractive opportunities emerging from the evolution of the market for catastrophe risk transfer, which Amlin is well placed to exploit.”
The Tramline Re II Limited principal-at-risk variable rate note program and the single tranche of notes due 7th July 2017 were both admitted for listing on the Bermuda Stock Exchange. The listing sponsor was Capital G Investments Ltd.
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