Gator Re extension continues, full pay-out of remaining collateral expected

by Artemis on May 9, 2017

The triggered Gator Re Ltd. catastrophe bond has had its maturity extended for another month, likely to provide time for the final loss estimates to be validated and for the anticipated payment of the remainder of the $35 million of retained collateral to occur.

The latest loss estimate, which we first reported on last month, showed that qualifying claims covered by the Gator Re cat bond had risen to just over $213.6 million, which as the attachment point was $175 million means that the extended and retained $35 million of the collateral principal was likely to be fully paid out to the sponsor American Strategic Insurance.

The catastrophe bond market has priced this fact into the Gator Re notes, with the broker pricing sheets reflecting the expectation of a total loss of the remaining collateral into their numbers in the last two weeks.

Sponsoring insurer American Strategic had already reported that it expected to make a $29.5 million reinsurance recovery under the Gator Re cat bond, so only $5.5 million of the retained principal would still be available and it’s expected that this will also be paid out to the insurer.

Now, the notes have been extended again to June 9th, but the extension notice seen by Artemis shows that some of the original $35 million of principal has been paid out to American Strategic already, as just $17.775,360 million of note principal remains to be extended.

We’re not sure when the next payment date to the sponsor is due, but it seems that the payouts are not perhaps coming as quickly as American Strategic had initially hoped, when it reported the $29.5 million recovery under that cat bond transaction.

However, being an indemnity cat bond reliant on reporting of loss estimates which then are typically validated by a calculation or reporting agent these things can take time, and hence the continued extension of the notes maturity into June.

Interestingly, according to FINRA’s Trace system, the Gator Re notes had not traded since September 2016, which shows the low level of investor sentiment in the bond’s ability to avoid a loss.

Given the further extension of notes and that the original maturity date had been the 9th January 2017, there is plenty of time for American Strategic to secure the rest of the payout as the cat bond can be extended for up to 36 months.

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