Integrity Re Ltd. (Series 2017-1)

American Integrity is entering the catastrophe bond market with the help of Hannover Re, with Hannover Rück SE acting as the ceding reinsurer, while American Integrity is the reinsured and so beneficiary of the fully-collateralized protection that the Integrity Re 2017-1 cat bond will provide, we understand from sources.

The target is a multi-year source of reinsurance protection against Florida named storms and severe thunderstorms, across a three year term and with capital markets cover afforded on an indemnity and per-occurrence basis.

Bermuda based special purpose insurer Integrity Re Ltd. will offer four tranches of Series 2017-1, with two set to provide first event protection and two second event cover only.

The Integrity Re 2017-1 cat bond is targeting $178 million of notes across the four tranches, but there is room to upsize should the sponsor elect to and market conditions allow.

Hannover Re will enter into a reinsurance agreement with Integrity Re, with the sale of the notes collateralizing this agreement, while American Integrity will be reinsured by Hannover Re. The covered subject business is Florida homeowners insurance policies, we’re told.

A Class A tranche of notes is offered at $50 million in size and will provide second event protection against loss from Florida named storms only. This tranche will attach at $3 million of losses for the second event, $1 million for subsequent events.

The Class A tranche has an attachment probability of 2.64%, an expected loss of 0.73% and the notes are being offered to investors with coupon price guidance of 3.5% to 4%.

The Class B tranche is just $3 million in size, will cover Florida named storms in a second and subsequent event basis, attach at $3 million for a second event and $1 million for a subsequent event, like Class A.

The Class B notes have an attachment probability of 10.41%, an expected loss of 9.84% and are offered to ILS investors with coupon guidance of 13.75% to 14.5%.

A Class C tranche is the largest at $100 million, and will cover Florida named storms for first and subsequent events, with an attachment point of $6 million for th first event, $3 million for the second and $1 million for subsequent events.

Class C has an attachment probability of 1.64%, an expected loss of 1.39% and the notes are offered with price guidance of 4% to 4.5%.

Finally, Class D is sized at $25 million and is the multi-peril tranche covering Florida named storms and severe thunderstorms, both on a first and subsequent event basis. This tranche of notes attach at $290 million of losses.

This tranche has an attachment probability of 1.74%, an expected loss of 1.67% and are offered to investors with coupon guidance of 4.5% to 5%, we understand.

Update 1:

American Integrity Insurance Company of Florida, Inc.’s first catastrophe bond issuance has increased in size while being marketed to ILS investors, resulting in a $210 million target for the Integrity Re Ltd. (Series 2017-1) transaction at lower price guidance.

The Class A tranche of notes which launched at $50 million in size and offers second event protection against losses from Florida named storms only has upsized to $72 million we understand. The initial coupon price guidance of 3.5% to 4% has been lowered to 3.25% to 3.5%, reflecting demand for more Florida named storm risk among investors.

The Class B tranche remains at just $3 million in size, offering cover for Florida named storms on a second and subsequent event basis. The coupon guidance for this small tranche which began at 13.75% to 14.5%, is now set to price at the upper end we’re told, at the 14.5% level.

The Class C tranche has also not upsized and remains as $100 million, offering Florida named storm cover for first and subsequent events. The initial price guidance for this tranche, of 4% to 4.5%, has fallen to the bottom end at 4% we understand.

Finally, the Class D notes which began as a $25 million tranche have now upsized to $35 million, and cover Florida named storms and severe thunderstorms, both on a first and subsequent event basis. The price guidance of 4.5% to 5% has been lowered to 4.25% to 4.5% at the latest update.

Update 2:

The $72 million Class A tranche of notes has been priced at the lowest end at 3.25%.

The $3 million Class B tranche priced at the upper end at 14.5% level.

The Class C tranche has priced at 4% we understand.

Finally, the Class D notes priced at the lowest end of the reduced guidance at 4.25%.