Gator Re Ltd. catastrophe bond launches for first-time sponsor

A catastrophe bond transaction, named Gator Re Ltd., has launched on behalf of sponsoring insurer American Strategic Insurance Group as it seeks to tap the capital markets for a source of reinsurance protection  through a cat bond for the first time.

According to sources the Gator Re Ltd. catastrophe bond has been launched to the market today by sole structurers and bookrunners Willis Capital Markets & Advisory.

The Gator Re cat bond sees Florida-based primary insurance group American Strategic Insurance seeking a multi-year, fully-collateralized source of reinsurance protection from capital markets investors through the sale of a single tranche of Series 2014-1 cat bond notes. The deal is being marketed with a preliminary size of $125m, Artemis understands.

The Series 2014-1 notes issued by Gator Re, a Bermuda domiciled SPI, will be sold to collateralize reinsurance contracts providing American Strategic Insurance and some named subsidiaries with fully-collateralized protection for U.S. named storms (so tropical storms and hurricanes) and U.S. severe thunderstorm risks.

The Gator Re cat bond is an indemnity transaction, so providing cover for the actual losses that American Strategic Insurance suffers. However sources told Artemis that it has an interesting, perhaps unique, structure with two different layers of protection both collateralized by the one tranche of notes.

The cover is split into two sections, Artemis understands. The first is exposed to U.S. named storms and severe thunderstorms on a per occurrence and indemnity basis, the second is exposed to just severe thunderstorms on an annual aggregate and indemnity basis. Both of these sections share the limit of the Series 2014-1 notes.

Named storm coverage is for the typical U.S. states affected by hurricanes and tropical storms, east coast, Gulf coast and Florida, while severe thunderstorm coverage is for the 48 U.S. contiguous states and the District of Columbia. The term for the Gator Re cat bond will be approximately 2 years 9 months, with maturity scheduled for the end of December 2016.

The per-occurrence layer, understood to be referred to as Section A, has an attachment point of $40m and an exhaustion point of $240m. The aggregate layer, referred to as Section B, has an attachment point of $150m and an exhaustion point of $350m. With the layer being $200m in size it would not be surprising if the Gator Re cat bond upsized to $200m by close.

So it would seem that the Gator Re cat bond will give American Strategic Insurance protection both for major losses from named storms and thunderstorms, through the per-occurrence layer, while an accumulation of attritional thunderstorm losses across an annual risk period will be covered in the aggregate layer’s protection.

The Gator Re notes have an attachment probability of 4.87%, an expected loss of 1.5% and an exhaustion probability of 0.58% at launch. Projected figures have also been calculated based on how American Strategic Insurance’s portfolio may look later in 2014, which sees the attachment probability rise to 6.47% and the expected loss to 1.76%.

The Gator Re Series 2014-1 notes are being marketed with pricing guidance of 7% to 7.75% Artemis understands.

That’s all the information we have on this Gator Re Ltd. catastrophe bond issuance for the moment. We will update you as more details emerge and you can always find this deal and every other cat bond in the Artemis Deal Directory.