Insurance and reinsurance group Argo is not yet ready to make a claim on its at-risk aggregate multi-peril catastrophe bond Loma Reinsurance (Bermuda) Ltd. (Series 2013-1), as the maturity date has been extended again.
The market continues to anticipate a loss of principal for the remaining $65 million of Class C notes from Argo’s Loma Re 2013 cat bond, but the size of the loss remains uncertain.
Argo has repeatedly elected to extend the maturity date on the notes for more than a year now, after the 2017 hurricane losses threatened the aggregate cat bond layer with losses possible to the underlying reinsurance and retrocession agreement.
The Loma Re 2013-1 Class C notes provide Argo with a $65 million source of fully collateralised reinsurance against losses from tropical cyclones, U.S earthquakes and U.S. severe thunderstorms, using a novel dual trigger, both indemnity and industry loss.
As an aggregate cat bond structure, Argo’s Loma Re 2013 Class C cat bond notes face losses from any or all three of last year’s major hurricanes, as it carries exposure to the U.S. and to Puerto Rico, so is likely aggregating losses from each of hurricanes Harvey, Irma and Maria.
Given how long the notes have now been extended and also marked down in the secondary market, it seems certain that the Loma Re Class C cat bond noteholders will face a loss of principal, but how much has yet to be decided.
The Loma Re 2013-1 catastrophe bond from Argo was first identified as likely to face a loss soon after the hurricanes struck the United States and Puerto Rico in the second-half of 2017.
Then, in January 2018 Argo elected to extend the maturity of this Class C tranche, while allowing the other tranches of the cat bond to mature. The maturity of the Class C notes was then further extended to July, then again to October 8th 2018 and finally to January 8th 2019.
Loss development clearly continues, likely driven by the loss creep from hurricane Irma and Argo’s desire to see that bill settle before it decides how large a claim to lodge with the investors in the Loma Re 2013 cat bond.
As a result, the maturity date for the $65 million Class C tranche of aggregate cat bond notes from this Loma Re 2013-1 issuance has now been extended again to April 8th 2019.
The Class C notes from Loma Re remain marked down by between 45% to 55% across a range of secondary market broker pricing sheets, still suggesting that at the moment the market is anticipating a roughly 50% loss to the tranche, which would amount to around $32.5 million.
The Loma Reinsurance (Bermuda) Ltd. (Series 2013-1) catastrophe bond from Argo Group is featured in our listing of cat bond payouts and defaults, where you can find details of all catastrophe bonds triggered and payouts made, since the market began.
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