American Integrity returns with $85m Integrity Re 2018-1 cat bond

by Artemis on April 3, 2018

Florida headquartered primary insurer American Integrity Insurance Company of Florida, Inc. has returned to the catastrophe bond market with an $85 million Integrity Re Ltd. (Series 2018-1) deal, which sees Hannover Re acting as ceding reinsurance company again to help the insurer access the investor base.

American Integrity sponsored its first catastrophe bond last year, with a $210 million Integrity Re Ltd. (Series 2017-1) transaction that secured it named storm and severe thunderstorm reinsurance from the capital markets to cover its Florida property insurance portfolio.

Now the insurer is back, according to sources, looking to expand that capital markets backed fully collateralized reinsurance protection with the help of Hannover Re again, with their entity Hannover Rück SE acting as the ceding reinsurer, so fronting the ILS investor base, while American Integrity is the reinsured and so beneficiary of the coverage.

The Integrity Re Ltd. special purpose insurer (SPI) will seek to issue two tranches of Series 2018-1 notes in this currently $85 million deal, with both being sold to cat bond investors and the proceeds used to collateralize the retrocession agreements between itself and Hannover Re, while Hannover Re enters into reinsurance agreements with American Integrity.

Both tranches of notes will provide American Integrity with a source of collateralized reinsurance against certain losses from Florida named storms and severe thunderstorms across a four-year term. Both tranches will feature an indemnity trigger, with coverage on a per-occurrence and cascading basis.

The currently $75 million tranche of Integrity Re Series 2018-1 Class A notes will be exposed to Florida named storm protection only. These notes will sit at the top of American Integrity’s reinsurance tower and given the cascading nature will drop-down as events erode stated reinsurance, FHCF and other cat bond layers beneath.

The Integrity Re Series 2018-1 Class A notes have an initial attachment probability of 1.34%, an initial expected loss of 1.27% and are to be offered to cat bond investors with guide pricing in a range from 3.75% to 4.25%.

The currently $10 million Integrity Re Series 2018-1 Class B tranche of notes will be exposed to both Florida named storms and Florida severe thunderstorm risks. This tranche is much riskier, sitting alongside the FHCF coverage within American Interity’s reinsurance tower.

The Integrity Re Series 2018-1 Class B notes have an initial attachment probability of 9.86% and an initial expected loss of 5.74%. Our sources told us that the guide pricing for this tranche of notes is only available through enquiry to the bookrunners, so not available to us at this time. Clearly the price will be higher but it’s possible that American Integrity does not want to advertise it to potential reinsurance counterparties until its program for the 2018 renewal is arranged.

It’s good to see American Integrity returning to the catastrophe bond market in 2018 as it looks to fill out more of its reinsurance program with the help of the capital markets.

We will update you as this Integrity Re Ltd. (Series 2017-1) cat bond comes to market and you can read about this and every other transaction in the Artemis Deal Directory.

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