Tailwind Re Ltd. (Series 2017-1)

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

  • Issuer / SPV: Tailwind Re Ltd. (Series 2017-1)
  • Cedent / Sponsor: Validus Holdings
  • Placement / structuring agent/s: Aon Securities is sole structuring agent and bookrunner
  • Risk modelling / calculation agents etc: AIR Worldwide
  • Risks / Perils covered: U.S., Canada, Puerto Rico, U.S. Virgin Islands named storms and earthquakes
  • Size: $325m
  • Trigger type: Industry loss index
  • Ratings: NR
  • Date of issue: Dec 2017

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

Bermuda headquartered reinsurance firm Validus Holdings is to sponsor its first full catastrophe bond issuance with this Tailwind Re Ltd. Series 2017-1 transaction.

Tailwind Re Ltd. is a newly formed Bermuda special purpose insurer (SPI) established to issue series of catastrophe bond notes for the sponsor.

In this first issuance, Tailwind Re Ltd. will offer three tranches of Series 2017-1 notes to cat bond investors, proceeds from the sale of which will be used to fully collateralized underlying reinsurance agreements with Validus companies.

We’re told that the transaction will provide retrocession and reinsurance to Validus Re, Talbot Underwriting and its syndicate at Lloyd’s of London, Western World and other Validus Holdings subsidiaries.

The Tailwind Re 2017-1 cat bond will provide the company with a capital markets backed source of collateralized reinsurance and retro covering the multiple perils of U.S., Canada, Puerto Rico and U.S. Virgin Islands named storms and earthquakes.

The reinsurance protection from the Tailwind Re 2017-1 cat bond will run for a four-year period, protecting Validus on an annual aggregate basis and using a weighted PCS industry loss index trigger.

Three cat bond tranches will be issued by Tailwind Re, all with different levels of risk and return for investors, but covering the same perils and territories on an industry loss basis, we understand.

A $125 million Class A tranche of notes have an initial attachment point of 3.79%, expected loss of 3.41% and are offered to ILS investors with price guidance of 7.75% to 8.5%.

A $125 million Class B tranche of notes are a little riskier, having an initial attachment point of 5.11%, expected loss of 4.43% and are offered to cat bond investors with price guidance of 9.5% to 10.25%.

The final $75 million Class C tranche are the riskiest, with an initial attachment point of 6.24%, expected loss of 5.64% and are being offered to cat bond investors with coupon price guidance of 11.5% to 12.5%.

We are told that each tranche will require an initial franchise deductible to be met before industry losses begin to accumulate to the index. We’re also told that this Tailwind Re cat bond would have faced losses during the Katrina, Rita, Wilma year of 2005, when the riskiest tranche would have paid out in full and the mid-risk tranche would have seen some loss of principal.

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