The latest Atlas catastrophe bonds from SCOR have grown in size during the marketing phase due to demand from investors. SCOR is issuing three tranches of notes, in two series, under their Atlas VI Capital Ltd. special purpose vehicle. Two tranches of Series 2011-1 cat bond notes are being issued to provide SCOR with U.S. hurricane and U.S. earthquake cover and one tranche of Series 2011-2 cat bond notes are being issued to provide European windstorm cover.
When this Atlas VI cat bond deal began marketing it was sized at approximately $200m. The two Series 2011-1 tranches were sized at $50m each while the Series 2011-2 tranche was €75m (so making around $200m total deal size). During the marketing phase there have been changes to the sizes of all three tranches, with the U.S. hurricane and U.S. earthquake cover portion growing significantly, while the European windstorm tranche has actually shrunk.
The total deal size is now said to be around $337m after the upsizing, a decent increase again showing the appetite amongst investors for cat bond investments in peak perils. The Series 2011-1 Class A tranche, which provides U.S. hurricane and earthquake cover, has grown to $125m. The Series 2011-1 Class B tranche, which provides U.S. hurricane and earthquake cover as well but for a higher layer of cover, has grown to $145m. So as it stands SCOR will benefit from $270m of additional U.S. hurricane and earthquake cover from this Atlas VI cat bond. The Series 2011-2 Class A tranche which covers European windstorm risks has actually shrunk down to €50m. We’re not really sure why this would have happened but either the notes can’t have been as attractive to investors or SCOR will have decided to downsize it. The cover from all tranches is on an aggregate basis.
The European windstorm tranche had an initial indicative pricing spread that was much lower than the U.S. hurricane and earthquake risks, which may have been part of the reason for the shrinking of this tranche as investors may have felt it didn’t offer a high enough return for taking on the risk.
We’re told that all tranches priced at the lower end of expectations.
We’ll update you when this deal closes officially and final ratings are announced. You can find full details on this Atlas VI Capital Ltd. 2011 transaction in our Deal Directory.