Sunshine Re Ltd. (Series 2013-1)

Sunshine Re Ltd. is a Bermuda domiciled special purpose insurer established on the 18th April for the purpose of issuing series of catastrophe bond notes.

This first Series 2013-1 issuance sees a single $20m tranche of notes being issued to provide the sponsor with a source of fully-collateralized reinsurance protection against Florida named storms.

The Sunshine Re cat bond transfers risks associated with named Florida windstorms on a per-occurrence basis over a three-year risk period for FMIT.

The $20m tranche of notes has a coupon of 9.25%.

Sunshine Re Ltd. has been arranged and issued on behalf of an interesting first time cat bond sponsor, the Florida Municipal Insurance Trust (FMIT). This organisation is the insurer to the Florida League of Cities, which looks after the interests of Florida municipal governments.

The cat bond coverage has been designed to dovetail with an existing layer of traditional reinsurance. The transaction effectively sees FMIT take a portion of its penultimate excess-of-loss layer of traditional reinsurance protection and on a pro-rata basis transfer it to the capital markets.

The remainder of that reinsurance layer provides one-year protection, so by leveraging the capital markets FMIT has successfully extended that layer of its reinsurance tower to include multi-year protection.

TWCM said that the portion of this layer transferred to the capital markets achieved attractive pricing for multi-year collateralized cover.

Given the municipal nature of the sponsor, the underlying book of property consists of governmental and municipal buildings, which is interesting as it perhaps offers a small element of diversification when compared to all other Florida wind or hurricane cat bonds which consist of residential homeowners and commercial properties.

There was no risk modelling agency used for this deal as investors undertook their own risk modelling.