Riverfront Re 2017 cat bond pricing fixed at top & bottom of guidance

The pricing has been fixed on both tranches of Great American Insurance Group’s second catastrophe bond, the $190 million Riverfront Re Ltd. (Series 2017-1) transaction, with the lower risk notes pricing at the top-end of guidance, while the higher risk tranche priced at the low-end.

With this new Riverfront Re 2017-1 cat bond Great American Insurance and its affiliates, including American Empire Surplus Lines, National Interstate Insurance, Mid-Continent Casualty Co. and its Neon branded Syndicate 2468 at Lloyd’s of London, are targeting fully collateralized reinsurance protection against losses from U.S. and Canada named storms, earthquakes, severe thunderstorms, winter storms, wildfires, meteorite impact and volcanic eruption.

That’s an expansion on the risks covered by its Riverfront Re Ltd. (Series 2014-1) cat bond, that matured at the end of 2016, while the deal size is double the $95 million that the 2014 Riverfront Re cat bond secured.

A reason for the increased size and coverage is the fact that the Neon syndicate at Lloyd’s of London was not part of the 2014 cat bond deal, although it would have been branded Marketform at the time.

Two classes of notes are being issued by Riverfront Re in this Series 2017-1 deal, with both per-occurrence and annual aggregate indemnity triggers for each tranche, although the main contributor to expected loss is per-occurrence losses. The notes will have a three and a half year term, to the end of 2020, so will cover four named storm seasons for Great American.

We’re told that the $142.5 million Class A tranche of notes which have an initial expected loss of 1.08% have priced at the upper end of guidance. They were offered to investors with coupon guidance in a range from 4% to 4.5%, but have priced at 4.5% we understand.

The $47.5m Class B tranche of notes, which are riskier with an expected loss of 2.63%, have gone the other way. Initially they were offered to investors with coupon guidance of 6.25% to 7%, but this tranche has been priced at the low-end of 6.25%.

It’s another clear sign that while cat bond pricing is currently very competitive and investors have demonstrated their ability to pass on the low-cost of their capital to sponsors, there are limits in respect of the returns they want to achieve.

This cat bond is scheduled to complete in advance of the June 1st reinsurance renewal for Great American. You can read all about this Riverfront Re Ltd. (Series 2017-1) transaction and every other deal since the market’s inception in the Artemis catastrophe bond Deal Directory.

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