Residential Reinsurance 2018 Limited (Series 2018-1)

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Residential Reinsurance 2018 Limited (Series 2018-1) - At a glance:

  • Issuer / SPV: Residential Reinsurance 2018 Limited (Series 2018-1)
  • Cedent / Sponsor: USAA
  • Placement / structuring agent/s: Goldman Sachs and Swiss Re Capital Markets are joint structuring agents and bookrunners
  • Risk modelling / calculation agents etc: AIR Worldwide
  • Risks / Perils covered: U.S. tropical cyclones (plus renter policy flood), earthquakes (plus fire following and renter policy flood), severe thunderstorm, winter storm, wildfire, volcanic eruption, meteorite impact, other perils (including auto policy flood)
  • Size: $175m
  • Trigger type: Indemnity
  • Ratings: ?
  • Date of issue: May 2018

Residential Reinsurance 2018 Limited (Series 2018-1) - Full details

This is USAA’s 31st securitization of insurance risk as a catastrophe bond, further extending the insurers use of the capital markets and ILS investors as a source of collateralized reinsurance capacity.

USAA returns with a new special purpose insurer Residential Reinsurance 2018 Limited, which will seek to issue $175 million at least in two tranches of Series 2018-1 notes to collateralize a multi-peril reinsurance agreement for the insurer.

The Residential Re Ltd. 2018-1 cat bond will provide USAA with reinsurance protection against losses from U.S. tropical cyclones (plus renter policy flood), earthquakes (plus fire following and renter policy flood), severe thunderstorm, winter storm, wildfire, volcanic eruption, meteorite impact, and other perils (including auto policy flood).

In this cat bond the one new addition, compared to previous Residential Re deals, is the inclusion in the covered perils auto policy flood caused by other perils.

Both tranches will provide USAA with annual aggregate reinsurance protection on an indemnity trigger basis, with a $75 million Class 11 tranche structured as a zero-coupon note providing one year of cover, while a $100 million Class 13 tranche will provide four years of reinsurance protection.

The $75 million Residential Re 2018-1 Class 11 notes, the one year zero coupon notes, will attach at $1.45 billion of losses to USAA, covering a layer up to $1.7 billion, and have an initial attachment point of 9.74% and expected loss of 7.3%. This tranche are being offered to ILS investors with price guidance of 86.75% to 87.75% of par value, which is akin to a coupon of 12.25% to 13.25%.

The $100 million Residential Re 2018-1 Class 13 notes, which will cover four years for USAA, will attach at $2.3 billion of losses and cover up to $3.7 billion, and have an initial attachment point of 1.76% and expected loss of 0.82%. These notes are being offered to investors with coupon guidance of 3.5% to 4%, our sources said.




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