First Coast Re cat bond well received by investor base: Swiss Re

by Artemis on June 13, 2016

Swiss Re Capital Markets, the insurance-linked securities (ILS) division of reinsurance giant Swiss Re, has highlighted how well investors received the recently launched First Coast Re catastrophe bond.

The $75 million First Coast Re Ltd. (Series 2016-1) cat bond issuance launched at the end of May, as the first transaction from new cat bond sponsor Security First Insurance Company.

Swiss Re Capital Markets structured and placed the deal, which covers Florida named storms and severe thunderstorms, on behalf of Swiss Reinsurance Americas Corporation, which is essentially acting as the ceding reinsurer, with Security First as the reinsured.

“Swiss Re is pleased to provide support to Security First Insurance on its debut catastrophe bond issuance. The transaction was very well received by investors, which was reflected in final pricing terms,” said Co-Head of ILS at Swiss Re Capital Markets, Jean-Louis Monnier.

Adding, “The transaction seamlessly integrates with Security First Insurance’s reinsurance program and encompasses a top-and-drop feature mirroring traditional terms.”

The deal initially targeted $100 million of fully collateralised reinsurance protection, which subsequently reduced to $75 million and priced at the lower end of a reduced spread guidance range of 4% to 4.25%, at 4%.

With an expected loss of 1.15% the transaction still offers investors a multiple of 3.48. This is above the average multiple offered on catastrophe bond issuance so far in 2016, which stands at 2.31 as of June 10th 2016, as recorded by the Artemis Deal Directory.

3.48 is an attractive multiple to investors in terms of risk/return, and in the current market landscape. And it’s also a sign of the markets increased maturity and the heightened understanding of ILS investors that the deal was well received, regardless of Security First being a first-time sponsor.

Data from the Artemis Deal Directory reveals that the average multiple for cat bond issuance has been on the decline in recent years, ending 2012 at 4.44 to ending 2015 at 2.46.

So for a first-time sponsor it’s encouraging that the deal was so well received, and that investor appetite was sufficient to support spread reduction.

Swiss Re acted as the joint structurer and joint bookrunner for the deal, taking its current number of outstanding cat bonds that it participates in some manner to 25, amounting to roughly $5.8 billion of outstanding risk capital (as at June 10th 2016).

This is according to data in the Artemis Deal Directory and the Artemis Catastrophe bond and ILS issuance banks and brokers leaderboard.

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