TransRe to sponsor first cat bond, a $200m Bowline Re Ltd. 2018-1

by Artemis on April 25, 2018

Transatlantic Holdings, the parent to Transatlantic Reinsurance (or TransRe), is set to sponsor its first catastrophe bond transaction this year, with the launch to investors of a $200 million Bowline Re Ltd. (Series 2018-1) deal, that will provide the firm with collateralized multi-peril reinsurance coverage.

In our more than twenty years of tracking catastrophe bond market issuance in our Deal Directory we have never listed a transaction sponsored by TransRe, until now as the firm looks to the cat bond market as an efficient complement to its reinsurance and retrocession arrangements.

The catastrophe bond market has attracted a number of new sponsors and some returning after a hiatus away from the market in 2018, which is evidence of the efficient execution achievable in the insurance-linked securities (ILS) market right now, even in the wake of the markets largest losses.

Transatlantic Holdings is looking at add a slice of capital markets backed, fully-collateralized reinsurance and retrocession with its first cat bond issuance.

The firm has established a new special purpose insurer (SPI) named Bowline Re Ltd. in Bermuda, we’re told and the vehicle will seek to issue a single $200 million tranche of Series 2018-1 Class A notes which will be sold to ILS investors and the proceeds used to collateralize underlying retrocessional reinsurance agreements between Bowline Re and TransRe’s companies.

We understand from sources that the beneficiaries of the reinsurance protection will be Transatlantic Reinsurance Company as well as its subsidiaries TransRe London, TransRe Zurich, Fair American Insurance and Reinsurance Company and Fair American Select.

Transatlantic is looking for a source of multi-peril retrocessional reinsurance coverage across a four-year term with this Bowline Re 2018-1 transaction.

We understand the covered perils include named storms, earthquakes and severe thunderstorms and the coverage will extend across the United States, Puerto Rico, Canada, the U.S. Virgin Islands and District of Columbia.

The currently $200 million of coverage that Bowline Re will provide to TransRe companies will be on an annual aggregate basis and the triggers used will be weighted industry loss indices.

The Bowline Re 2018-1 Class A notes will have an initial attachment probability of 2.16%, an expected loss of 1.6% and are being offered to cat bond investors with coupon price guidance in a range from 4.25% to 4.75%, we are told.

TransRe is no stranger to the capital markets, having a long-established collateralized reinsurance sidecar program named Pangaea Re, as well as other initiatives that work directly with fully collateralized sources of reinsurance capital.

But it is encouraging to see TransRe enter the catastrophe bond market and it is a further sign that companies are recognising the efficiencies that broadly syndicated, securitised notes backing their reinsurance or retro can provide.

Another new cat bond sponsor coming to market is also a signal to other potential sponsors that now is the time to look to the capital markets and evaluate bringing a first catastrophe bond issuance to market.

We will update you as this currently $200 million Bowline Re Ltd. (Series 2018-1) catastrophe bond comes to market and you can read about every cat bond transaction since the market’s inception in the Artemis Deal Directory.

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