Given catastrophe bond investors strong appetite for new issuance currently it’s no surprise to learn that U.S. primary insurance company Allstate’s new Sanders Re Ltd. (Series 2017-1) catastrophe bond has upsized to $375 million, while the price guidance has been lowered.
Every cat bond issued so far this year has resulted in very attractive pricing for the sponsors, while the majority have increased in size from their initial launch, as insurance-linked securities (ILS) investors and ILS funds demonstrate their appetite for new risk.
According to market sources the Sanders Re 2017-1 cat bond issue is set to increase in size by 25%, from the $300 million it launched as to now offer the ILS investment community $375 million of notes.
At the same time, the price guidance for the single tranche of Series 2017-1 notes to be issued by Sanders Re has been lowered.
The notes were launched to investors offering a coupon in a range from 3.25% to 3.75%, but that guidance has dropped to below that initial range, so the notes are now offered with a price bracket of 3% to 3.25%.
With this Sanders Re 2017-1 cat bond Allstate is targeting securing capital markets-backed U.S. multi-peril collateralised reinsurance capacity, covering losses from perils including named storms, earthquakes, severe thunderstorms, volcanic eruption and meteorite impacts.
With the coverage from this cat bond on an indemnity and per-occurrence basis across a four and a half-year risk period, running to November 2021, this transaction actually provides reinsurance protection across five U.S. hurricane seasons for the insurer, which could be the first cat bond to do so.
Having failed to get a seven year cat bond off the ground a few years ago, resulting in the insurer returning to traditional reinsurance, Allstate has always sought to push the boundaries of the ILS market in order to secure more attractive and cost-effective reinsurance protection.
It’s also worth noting that while this cat bond is marketed as an indemnity transaction, it does have an industry loss element to it, as we wrote earlier this week.
With this transaction upsizing and looking set to price at lower levels than where it launched, it looks like the insurer is set to achieve this in 2017.
We’ll update you as this transaction comes to market.
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