Bowline Re Ltd. (Series 2019-1)

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Bowline Re Ltd. (Series 2019-1) – At a glance:

  • Issuer: Bowline Re Ltd. (Series 2019-1)
  • Cedent / sponsor: Transatlantic Reinsurance Co.
  • Placement / structuring agent/s: Aon Securities is sole structuring agent and bookrunner
  • Risk modelling / calculation agents etc: AIR Worldwide
  • Risks / perils covered: U.S., Puerto Rico, U.S. Virgin Islands, D.C., Canada named storm, earthquake and severe thunderstorm
  • Size: $250m
  • Trigger type: Industry loss index
  • Ratings: NR
  • Date of issue: Mar 2019

Bowline Re Ltd. (Series 2019-1) – Full details:

This is Transatlantic Holdings second catastrophe bond, following on from its first Bowline Re Ltd. transaction in 2018.

This new Bowline Re 2019-1 cat bond will provide Trans Re and subsidiaries with a four year source of annual aggregate retrocessional reinsurance protection on an industry loss trigger basis, across four individual risk periods.

Special purpose insurer (SPI) Bowline Re Ltd. will seek to issue two tranches of Series 2019-1 cat bond notes which will be sold to investors and the proceeds used to collateralize the underlying retro reinsurance agreements between Transatlantic and Bowline Re.

The Bowline Re Ltd. (Series 2019-1) catastrophe bond sees Trans Re seeking to expand its retrocessional reinsurance protection for its portfolio of property catastrophe risks.

The deal will cover business ceded from Transatlantic Reinsurance Company and subsidiaries including TransRe London, TransRe Zurich, Fair American Insurance and Reinsurance Company and Fair American Select, the same as the 2018 transaction.

This new Bowline Re 2019-1 cat bond will provide TransRe and its subsidiaries with a four-year source of annual aggregate retrocessional reinsurance protection on an industry loss trigger basis, across four individual risk periods.

Coverage will be on an industry loss trigger and annual aggregate basis for named storms, earthquakes and severe thunderstorms affecting the United States, Canada, Puerto Rico, the U.S. Virgin Islands and District of Colombia, across each risk period.

Currently sized at $200 million according to our sources, there is every chance this cat bond upsizes, enabling TransRe to expand its capital markets and fully collateralized retro coverage.

Bowline Re Ltd. will issue two tranches of notes, sized at $100 million each currently.

A $100 million Class A tranche is the lower risk layer of notes, with an initial attachment probability of 1.6%, an expected loss of 1.36% and are being offered to investors with price guidance in a range from 4.5% to 5%, we’re told.

A currently $100 million Class B tranche is much higher risk, with an initial attachment probability of 6.08%, an expected loss of 3.69% and are being offered to investors with price guidance in a range from 8% to 8.75%.

For comparison, the Bowline Re 2018 cat bond was a single $250 million tranche with an expected loss of 1.6% and these were priced at 4.5% at issuance.

Update 1:

The Class A tranche, which is the lower risk layer of notes having an expected loss of 1.36%, is now targeting a size of up to $125 million. At launch this tranche was offered to investors with price guidance in a range from 4.5% to 5%, but we’re told this range has tightened towards the upper-end at 4.75% to 5%.

The Class B higher risk tranche, which has an expected loss of 3.69%, is now targeting a size of $125 million to $150 million, we understand. These notes were offered to investors with price guidance in a range from 8% to 8.75%, but that range has now been fixed at 8.5%, so above the mid-point of guidance.

So this could be TransRe’s largest cat bond to-date, if it reaches the maximum target size at $275 million, larger than its 2018 deal’s $250 million.

Update 2:

We understand that the Bowline Re 2019 cat bond has now been priced and in terms of size reached $250 million.

The lower risk Class A tranche of notes stayed at $100 million in size and with coupon pricing of 4.75%, so the mid-point of initial guidance.

The higher risk Class B tranche of notes grew to $150 million in size, with coupon pricing fixed at 8.5%, so above the initial mid-point of guidance.

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