Skyline Re Ltd. (Series 2017-1)

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

  • Issuer / SPV: Skyline Re Ltd. (Series 2017-1)
  • Cedent / Sponsor: The Cincinnati Insurance Company
  • Placement / structuring agent/s: Jardine Lloyd Thompson Capital Markets are structuring agent and bookrunner
  • Risk modelling / calculation agents etc: Participating investors undertook their own risk modelling
  • Risks / Perils covered: U.S. earthquake and severe thunderstorms
  • Size: $180m
  • Trigger type: Indemnity
  • Ratings: NR
  • Date of issue: Feb 2017
  • Artemis.bm news coverage: Articles discussing Skyline Re Ltd. (Series 2017-1) from Artemis.bm

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

This Skyline Re 2017-1 transaction is a three-year, privately placed catastrophe bond, which closed on the 7th February 2017, and offers Cincinnati Insurance a fully collateralised source of indemnity based reinsurance protection against losses from earthquakes and severe thunderstorm (convective storm).

The Skyline 2017-1 private cat bond is structured in two classes of notes, with a $100 million Class 1 tranche covering U.S. earthquake risks (excluding California) only on a per-occurrence basis, while an $80 million Class 2 tranche features two sections covering U.S. earthquake risks (excluding California) and U.S. convective storm losses (excluding Florida), respectively on a per-occurrence and annual aggregate basis.

The Class 1 tranche of earthquake only per-occurrence exposed notes will pay investors a coupon of 2.5%, we understand. The Class 2 tranche, with two sections for per-occurrence earthquake and aggregate convective storm losses, is considerably riskier and will pay investors a coupon of 12%. The attachment point for the Class 2 convective storm section is $190m of losses.

Cincinnati Insurance also entered into an additional $20 million three-year collateralised reinsurance contract for further U.S. earthquake protection, which takes the total collateralised earthquake protection from this arrangement to $200 million.

Update:

Cincinnati Financial reported that severe convective storm activity in 2017 had eroded the deductible sitting beneath the SCS section of the Class 2 notes.

By the end of Q1 2017 the aggregated qualifying losses had reached $106 million, with three severe thunderstorm events largely to blame. The tally rose further to $119 million by the end of Q2 2017.

With the attachment point for the severe convective storm section of the Class 2 notes sitting at $190m the deductible had been 62% eroded by the 30th June 2017.




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