Pelican Re Ltd. (Series 2012-1)

The first cat bond under a newly formed Cayman Islands special purpose insurer, Pelican Re Ltd. was formed to issue cat bonds on behalf of Louisiana Citizens Property Insurance Corporation.

This first Series 2012-1 cat bond from Pelican Re is designed to provide Louisiana Citizens with 3 years of indemnity based (UNL) cover for hurricanes in Louisiana state on a per occurrence basis.

It’s understood that this cat bond will provide a relatively low level of cover, with a low attachment point, and so will protect Louisiana Citizens against even smaller hurricanes. This does mean that the coupon paid to investors is expected to be high making the deal attractive to them.

The Pelican Re deal began marketing as a $100m single tranche of notes but increased in size to $125m before close. The notes have a low attachment point as Lousiana Citizens are seeking a robust layer of cover. The notes attach at $200m of losses and the exhaustion point is set at $400m. This translates into a high probability of attachment at 4.74% and a high expected loss of 3.25%. Unsurprisingly the pricing for the deal is quite high with the coupon set to be 13.75% above money market funds which is towards the top end of the expected range.

This cat bond was not rated. The single tranche of notes have been listed on the Caymans Islands Stock Exchange and the shelf programme is available until April 2017 for Louisiana Citizens to issue more cat bond notes if they choose.