French headquartered global reinsurance firm SCOR has returned to the capital market for its first catastrophe bond in over two years and has switched its preferred ILS domicile to the UK, leveraging the new regulatory regime there to sponsor a $300 million Atlas Capital UK 2018 PLC (Series 2018 ISPV 1) transaction.
SCOR’s previous Atlas catastrophe bonds, which provide the company with a source of property catastrophe retrocessional reinsurance, have been largely domiciled in Ireland in recent years, so this switch to the UK by a major global reinsurer for its latest cat bond deal is a vote of confidence for the recently enacted UK ILS regulatory and tax regime.
This transaction from SCOR is the first full catastrophe bond issuance to be domiciled in the UK, as the only other use of the ILS regulatory framework by Neon is really a sidecar, or collateralized quota share reinsurance arrangement.
SCOR has registered a new UK company for its first cat bond issuance there, registering Atlas Capital UK 2018 PLC as an insurance special purpose vehicle to be the transformer for and issuer of a single tranche of Series 2018 ISPV 1 notes, we understand.
With the Atlas Capital UK 2018 catastrophe bond SCOR is targeting at least $300 million of multi-peril retrocessional reinsurance protection across a four-year term, to protect the reinsurer against the impacts of U.S. named storm, U.S. and Canada earthquake and European windstorm risks.
The coverage is effected through SCOR Global P&C SE as the ceding company, but applies across SCOR’s portfolio companies we believe.
We’re told that the $300 million of Series 2018 ISPV 1 notes issued by Atlas Capital UK 2018 will provide SCOR with retro reinsurance coverage on an annual aggregate basis, using regionally weighted industry loss triggers that take into account a deductible per-event for each of the covered perils.
The $300 million single tranche of Series 2018 ISPV 1 notes to be issued by Atlas Capital UK 2018 will have an initial attachment probability of 3.98%, an initial expected loss of 3.24% and are being offered to ILS investors with spread guidance in a range from 6% to 6.5%, sources said.
In terms of pricing, that is a little lower than SCOR’s last cat bond transaction, the $300 million Atlas IX Capital DAC (Series 2016-1) which had an initial expected loss of 3% and priced at 7.5%, but that did not include the European windstorm risk and of course time has moved on and prices are keener now for cat bond coverage.
It’s encouraging to see such a major reinsurer utilising the UK ILS framework for its latest transaction, as it will help to give other sponsors greater comfort.
It’s also encouraging that this is a European sponsor, as the uncertainty surrounding the UK’s impending Brexit from the EU has been said to put off some potential ILS sponsors.
Seeing SCOR move its cat bond domicile from Ireland to the UK and make use of the new ILS framework will provide an important stamp of approval for the UK regime that should help to encourage other major issuers to try out the country as an ILS domicile.
SCOR has been utilising catastrophe bonds as part of its retrocessional reinsurance program since 2000 and this is the second that looks for a larger amount of coverage for U.S. perils, reflecting some growth by SCOR into U.S. catastrophe risks in recent years, as the reinsurer leverages the capital markets to protect its portfolio and earnings against major loss events.
We’ll update you as this Atlas Capital UK 2018 PLC (Series 2018 ISPV 1) United Kingdom domiciled catastrophe bond comes to market and you can read about this and every other transaction since the market began in the Artemis Deal Directory.
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