European insurance giant Assicurazioni Generali is set to upsize its innovative motor third-party liability ILS deal Horse Capital I DAC, as the targeted transaction size has risen from €180m at launch to a new target of between €210m to €240m (US$255m).
Generali is seeking to leverage the catastrophe bond structure and insurance-linked securities (ILS) investors to secure a multi-year collateralised source of reinsurance protection against deteriorating motor third-party liability claims ratios within its European business.
It’s the first cat bond like deal to feature a liability loss ratio trigger that we’ve seen in the history of the market and the first cat bond like deal to seek reinsurance protection for a casualty risk in more than a decade.
According to sources Generali’s casualty ILS deal has been well-received by the ILS community, with the transaction now expected to increase in size from the original target of €180m to somewhere between €210m to €240m (US$255m).
Generali is seeking to secure three layers of reinsurance cover against losses causing a deterioration in its motor third-party liability claims ratio, with three tranches of notes to be issued and sold through the Ireland domiciles Horse Capital I DAC vehicle.
The transaction will provide cover for a significant deterioration in the motor third-party liability loss ratio’s of an aggregated group of its insurer subsidiaries around Europe, using an indemnity and annual aggregate structure.
All three tranches of notes were originally marketed as €60m in size, but at the latest update we’re told the target for each tranche is now set at from €70m to €80m.
At the same time the price guidance has been fixed, with coupon pricing looking likely to settle around mid to upper of the initial ranges.
The Class A tranche of notes, which are the least risky, were initially marketed to investors with price guidance of 3.5% to 4.5%. This has now been fixed at the mid-point of guidance at 4%.
The Class B tranche, which are the middle risk layer of the transaction, were offered with price guidance in a range from 6% to 7%. This tranche has had its pricing guidance fixed at 6.25%, so just below the mid-point from where it launched.
Finally, the most risky Class C tranche, which were marketed with price guidance of 10.5% to 12%, have had their pricing fixed at the upper end at 12%.
The Horse Capital I casualty ILS deal is set to complete next week and encouragingly the upsize potential shows the market has received it well, which could stimulate other sponsors to seek out casualty cover from the capital markets.
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