Galilei Re Ltd. (Series 2017-1)

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Galilei Re Ltd. (Series 2017-1) - At a glance:

  • Issuer / SPV: Galilei Re Ltd. (Series 2017-1)
  • Cedent / Sponsor: XL Bermuda Ltd.
  • Placement / structuring agent/s: GC Securities is sole structuring agent and joint bookrunner. Aon Securities is joint bookrunner.
  • Risk modelling / calculation agents etc: AIR Worldwide
  • Risks / Perils covered: U.S. named storm, U.S. earthquake, Canada earthquake, European windstorm, Australian tropical cyclone, Australian earthquake
  • Size: $525m
  • Trigger type: Industry loss index
  • Ratings: NR
  • Date of issue: Jan 2017

Galilei Re Ltd. (Series 2017-1) - Full details

XL Catlin companies are returning to the catastrophe bond market seeking $1 billion of capital markets backed reinsurance protection with twin Galilei Re Ltd. (Series 2016-1) and Galilei Re Ltd. (Series 2017-1) issuances.

Given the timing, the Galilei Re Ltd. catastrophe bond is being issued in two series, with a 2016-1 series aiming for issuance before the end of the year and a 2017-1 series targeting a January issuance.

Both Series target $500m of fully collateralised reinsurance protection each, across five tranches of notes per series, but with the 2016-1 tranches providing three year coverage and the 2017-1 tranches four years.

All ten tranches will provide XL Catlin subsidiaries with collateralised reinsurance protection for losses from U.S. named storms, U.S. earthquakes, European windstorms, Australian tropical cyclones and Australian earthquakes.

The Galilei Re cat bond will provide its cover on an industry loss and annual aggregate basis, with U.S triggers provided by PCS, while PERILS AG will provide industry loss trigger data for European and Australian risks (this is the first cat bond to feature a PERILS index for Australia risks).

The ceding insurer is XL Bermuda Ltd. but this global multi-peril reinsurance protection covers XL Catlin insurers, reinsurers and Lloyd’s of London syndicates, so it is a broad coverage providing peak peril coverage on an aggregate basis across the re/insurance group (so retrocessional and reinsurance in nature).

The 2016-1 and 2017-1 series of notes provide the same coverage, with all five tranches of cat bond notes under each series providing a range of reinsurance cover at different attachment points.

Effectively the Series 2016-1 and 2017-1 cat bonds are identical apart from the duration, but XL Catlin has elected to separate them likely to maximise investor demand over the peak December to January renewal period and to gain the benefits of the different durations of coverage.

Details of the Galilei Re Series 2017-1 tranches:

A $62.5m Series 2017-1 Class A-2 tranche of notes will cover losses from $200m to $400m for the ceding insurer, with an attachment probability of 12.6% and an expected loss of 8.65%. These notes are offered with price guidance of 12.5% to 13.25%.

A $62.5m Series 2017-1 Class B-2 tranche of notes will cover losses from $400m to $600m for the ceding insurer, with an attachment probability of 5.91% and an expected loss of 4.55%. These notes are offered with price guidance of 7.75% to 8.5%.

A $125m Series 2017-1 Class C-2 tranche of notes will cover losses from $600m to $800m for the ceding insurer, with an attachment probability of 3.47% and an expected loss of 2.75%. These notes are offered with price guidance of 5.75% to 6.5%.

A $125m Series 2017-1 Class D-2 tranche of notes will cover losses from $800m to $1bn for the ceding insurer, with an attachment probability of 2.25% and an expected loss of 1.86%. These notes are offered with price guidance of 4.5% to 5.25%.

Finally, a $125m Series 2017-1 Class E-2 tranche of notes will cover losses from $1bn to $1.2bn for the ceding insurer, with an attachment probability of 1.54% and an expected loss of 1.29%. These notes are offered with price guidance of 3.75% to 4.5%.

So, if the transaction hits targets, both series of the Galilei Re catastrophe bond will provide a $1 billion source of layered multi-peril catastrophe reinsurance coverage, collateralised by the capital markets and covering losses for XL Catlin companies right the way from an attachment point of $200m up to an exhaustion point of $1.2 billion.

Update 1:

This Galilei Re 2017-1 cat bond upsized slightly to $525 million before close. All five tranches of notes saw changes to their size, with some shrinking and some growing, while the pricing generally moved towards the upper end on most of them.

The Series 2017-1 Class A-2 tranche of notes shrank to $50m while pricing was fixed at the upper end of guidance at 13.25%.

The Series 2017-1 Class B-2 tranche of notes also shrank to $50m with pricing fixed at 8%, so towards the lower end of the range.

The Series 2017-1 Class C-2 tranche of notes upsized to $150m, with pricing fixed towards the upper end at 6.25%.

The Series 2017-1 Class D-2 tranche of notes grew to $150m, with coupon pricing fixed at the top-end of guidance at 5.25%.

Finally, the Series 2017-1 Class E-2 tranche of notes remained the same size at $125m, with pricing set to settle at the upper-end of guidance at 4.5% we understand.

Read details of the Galilei Re Ltd. (Series 2016-1) issuance.




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