Riverfront Re Ltd. (Series 2017-1)

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

  • Issuer / SPV: Riverfront Re Ltd. (Series 2017-1)
  • Cedent / Sponsor: Great American Insurance Group
  • Placement / structuring agent/s: Aon Securities and Goldman Sachs are joint structuring agents and bookrunner.
  • Risk modelling / calculation agents etc: RMS
  • Risks / Perils covered: U.S. and Canada named storms, earthquakes, severe thunderstorms, winter storms, wildfires, meteorite impact, volcanic eruption
  • Size: $190m
  • Trigger type: Indemnity
  • Ratings: NR
  • Date of issue: May 2017
  • Artemis.bm news coverage: Articles discussing Riverfront Re Ltd. (Series 2017-1) from Artemis.bm

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

Great American Insurance Group, a subsidiary of financial services firm American Financial Group, is back with its second catastrophe bond, a $190 million Riverfront Re 2017-1 transaction which will renew its maturing 2014 deal and double its size.

The insurers first cat bond, Riverfront Re Ltd. (Series 2014-1) which matured at the end of 2016, was just $95 million in size and covered Great American and subsidiaries for losses from U.S. and Canada named storms, earthquakes, severe thunderstorms and winter storms.

The new Riverfront Re 2017-1 cat bond is twice the size at $190 million and sees the peril coverage expanded so that Great American will benefit from fully collateralized reinsurance protection for losses due to U.S. and Canada named storms, earthquakes, severe thunderstorms, winter storms, wildfires, meteorite impact and volcanic eruption.

So this cat bond renewal not only increases the amount of protection but also broadens it considerably for Great American Insurance Group.

This 2017-1 issuance will see Riverfront Re Ltd. issuing two classes of notes which will be sold to investors to provide a source of indemnity based reinsurance coverage, with both per-occurrence and annual aggregate triggers for each tranche, however the main contributor to expected loss is per-occurrence losses, we’re told.

The reinsurance protection provided will run for three and a half years, to the end of 2020, so will cover four named storm seasons for Great American.

A $142.5 million Class A tranche of notes will cover 95% of losses from an attachment point of $150m, so have an initial attachment probability of 1.88%, an expected loss of 1.08% and are offered to investors with price guidance in a range from 4% to 4.5%.

A $47.5m Class B tranche will cover 95% of losses from an attachment at $100m, with an initial attachment probability of 3.72%, an expected loss of 2.63% and are offered with coupon guidance of 6.25% to 7%.

The Riverfront Re 2017-1 transaction will be completed by the end of May, in time for the June 1st reinsurance renewal and as named storm risks make up the majority of this cat bonds expected loss the start of the 2017 hurricane season.

Update 1:

We’re told that the $142.5 million Class A tranche of notes which have an initial expected loss of 1.08% have priced at the upper end of guidance. They were offered to investors with coupon guidance in a range from 4% to 4.5%, but have priced at 4.5% we understand.

The $47.5m Class B tranche of notes, which are riskier with an expected loss of 2.63%, have gone the other way. Initially they were offered to investors with coupon guidance of 6.25% to 7%, but this tranche has been priced at the low-end of 6.25%.




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