TCIP targets up to $200m with Bosphorus 2015-1 cat bond

by Artemis on August 7, 2015

The Turkish Catastrophe Insurance Pool (TCIP) is aiming for up to $200m of collateralized Turkish earthquake reinsurance protection from its new Bosphorus Ltd. (Series 2015-1) parametric catastrophe bond.

The second parametric quake cat bond from TCIP launched with a minimum size of $100m in July. It’s now understood that the earthquake and catastrophe risk pooling insurer is seeking more than that ideally, with $200m seen as the potential maximum cat bond size.

Even at the maximum of $200m, the new Bosphorus 2015-1 cat bond will only replace half of the TCIP’s Bosphorus 1 Re deal when it matures next year. However, once completed the insurer will benefit from as much as $600m of collateralized parametric reinsurance coverage from the capital markets until that deal either renews or rolls off-risk.

Being a parametric earthquake cat bond, the new Bosphorus deal has a trigger based on the spectral acceleration recorded from a quake, at a number of calculation locations. An index value would be calculated, which if it reached the attachment point would result in a loss to the cat bond’s investors.

This latest deal will provide the insurer with per-occurrence reinsurance coverage for a slightly more risky layer of its program, as this deal has a higher attachment probability than its first Bosphorus.

The pricing indications look good for TCIP, with the cat bond that launched with guidance of 3.5% to 4% now said to be likely to complete with pricing below that range, somewhere from 3.25% to 3.5%.

With an initial expected loss of 1.5%, the Bosphorus 2015-1 cat bond looks set to complete offering investors a multiple of between 2.17 and 2.33 times EL. For comparison, the Bosphorus 1 Re cat bond had an initial multiple of 2.48 times the lower expected loss of 1.01%.

Given the decline in cat bond pricing since Bosphorus 1 Re Ltd. was issued in 2013, that seems inline with other recent price indications.

The transaction book is scheduled to close tomorrow, we understand, with pricing to be set early next week and completion aiming for next Friday.

You can read all about the Bosphorus Ltd. (Series 2015-1) catastrophe bond and every other cat bond transaction to date, in the Artemis Deal Directory.

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