Global specialty property and casualty insurance and reinsurance firm Catlin is returning to the catastrophe bond market in search of capital markets backed reinsurance cover for the first time since 2008 with a new multi-peril cat bond deal, Galileo Re Ltd. (Series 2013-1).
Catlin last sponsored a cat bond deal back in 2008 with the multi-peril Newton Re Ltd. (Series 2008-1) transaction. Their third cat bond issuance after Bay Haven Ltd. in 2006 and Newton Re Ltd. in 2007, the Newton Re 2008 deal matured at the end of 2010 since when Catlin has not tapped the cat bond market as a source of protection.
According to our sources broker Willis Group has launched this Galileo Re cat bond for Catlin, with its Willis Capital Markets & Advisory division the sole structuring agent and bookrunner on the transaction. The deal is being marketed with a preliminary size of $175m, a number which could clearly grow if it follows recent cat bond issuance trends and finds investor demand.
Galileo Re Ltd., a Bermuda domiciled special purpose insurer, is seeking to issue a single tranche of notes which will fully-collateralize a reinsurance agreement with Catlin Insurance Company, the Bermuda insurance and reinsurance entity of Catlin Group. The protection will be on an annual aggregate basis using an index constructed of industry losses and will the cat bond covers U.S. named storm risks (so tropical storms, hurricanes and any storm which has been named), U.S. earthquake risks, Canada earthquake risks and European windstorm risks.
In terms of the contribution of risks in this Galileo Re cat bond deal, we’re told that Florida, Texas, Hawaii and New York hold the most exposure for U.S. named storms, California for U.S. earthquake, British Columbia for Canadian quake and the UK, France and Germany for European windstorm.
The deal will provide Catlin with protection for three years from January 2014, so there is no exposure to the current U.S. hurricane season which should help the cat bond be more enthusiastically received by investors at this time of year. The Galileo Re cat bond will cover losses from most of Catlin’s insurance and reinsurance subsidiaries as well as its Lloyd’s syndicates.
Being a cat bond providing annual aggregate cover, this deal will accumulate losses throughout each annual risk period, with reported industry losses being converted to an event index value which will accumulate during the year. We’re told the attachment point is an index value of $480m and the exhaustion point is an index level of $800m, while a $40m event deductible applies.
The reporting agencies for each of the perils are PCS for U.S. named storms and U.S. earthquakes and PERILS for European windstorms. AIR Worldwide is the risk modelling firm for this cat bond.
The $175m of notes being marketed have an annualised attachment probability of 3.6%, an annualised exhaustion probability of 1.31% and an annualised expected loss of 1.31%. The notes are being offered to investors with coupon guidance of 7.75% to 8.5%.
That’s all the details we have for now about this new catastrophe bond from Catlin . As the transaction comes to market we will update you if more details become available. You can read all about Galileo Re Ltd. (Series 2013-1) in our Deal Directory.