Atlas VI Capital Ltd. (Series 2011-1)

SCOR are returning to the cat bond market with another deal using their Dublin, Ireland domiciled Atlas VI Capital Ltd. entity.

This latest Atlas VI Capital 2011 cat bond transaction will provide SCOR with industry loss based cover for $100m of U.S. hurricane and U.S. earthquakerisks and €75m of European windstorm risks.

The deal comprises $50m Atlas VI Capital Ltd. Series 2011-1 Class A notes and $50m Class B notes which are exposed to U.S. hurricanes and earthquakes, and €75m Atlas VI Capital Ltd. Series 2011-2 Class A notes which are exposed to European windstorm. The U.S. hurricane and earthquake exposure cover will run from January 2012 until the end of December 2014 while the European windstorm cover will run from December 2011 until the end of March 2015, securing an extra full Euro windstorm season of protection. The cover afforded is fully collateralized, multi-year and measured on an annual aggregate basis over the risk periods.

This deal will provide SCOR with partial replacement cover for the U.S. hurricane and earthquake cover from their soon to mature Atlas V cat bond transaction. That deal afforded them $200m of cover for those risks so we could see the 2011-1 notes grow before close if SCOR seek to fully replace that cat bond through this deal.

Series 2011-1 Class A notes provide cover for losses above an index value of 350 up to an exhaustion point of 450 on the index on an aggregate basis. These notes have an annualized probability of attachment of 4.53% over the term of the deal.

Series 2011-1 Class B notes provide cover for losses above an index value of 450 up to an exhaustion point of 550 on the index on an aggregate basis. These notes have an annualized probability of attachment of 3.25% over the term of the deal.

Both the Series 2011-1 notes have an index deductible of 45 index points which will be applied to all events contributing to the aggregate.

Series 2011-2 Class A notes provide cover for losses above an index value of 450 up to an exhaustion point of 550 on the index on an aggregate basis. These notes have an annualized probability of attachment of 4.23% over the term of the deal. The index deductible for these notes is 30 index points per qualifying event contributing to the aggregate.

For the Series 2011-1 notes, risk modeller AIR will calculate a county weighted PCS index using specific event parameters from either the National Weather Service or the U. S. Geological Survey depending on the peril.

For the Series 2011-2 notes, AIR will obtain the PERILS reported loss figures for each CRESTA zone.

For all risks AIR will then calculate a transaction index value for each event, using deal specific payout factors.

Pricing guidance for the notes is as follows:

Series 2011-1 Class A: 1525 – 1625 bps
Series 2011-1 Class B: 1250 – 1350 bps
Series 2011-2 Class A: 750 – 850 bps

Collateral will be invested in European Bank for Reconstruction and Development (EBRD) floating-rate notes.

Update: The transaction has upsized significantly during the marketing phase. Overall it is now going to provide SCOR with approximately $337m of cover. The tranches are now sized:

Series 2011-1 Class A: $125m
Series 2011-1 Class B: $145m
Series 2011-2 Class A: €50m

It’s not known why the European windstorm cover tranche actually downsized but it does pay a much lower premium than the others. All tranches priced at the lower end of the expected ranges we are told.