The debut catastrophe bond from Transatlantic Holdings, the parent to Transatlantic Reinsurance (or TransRe), is set for an increase in size, as sources said the Bowline Re Ltd. (Series 2018-1) transaction is likely to grow to $250 million, while its pricing looks set to move to the mid-point of guidance.
TransRe entered the catastrophe bond market for the first time this year, with what was a $200 million Bowline Re 2018-1 transaction, as it looks to secure a multi-year, capital markets backed source of fully-collateralized property catastrophe retrocessional reinsurance protection.
Using a newly registered Bermuda special purpose insurer (SPI) called Bowline Re Ltd., TransRe was hoping to see a single $200 million tranche of Series 2018-1 Class A notes issued, which would be sold to ILS investors and the proceeds used to collateralize underlying retrocessional reinsurance agreements between Bowline Re and TransRe’s companies.
Now, thanks to investor demand, we understand that the issuance is set to increase in size to $250 million of notes issued.
The notes will provide their now $250 million of reinsurance protection to Transatlantic Reinsurance Company as well as named subsidiaries TransRe London, TransRe Zurich, Fair American Insurance and Reinsurance Company and Fair American Select.
The Bowline Re 2018-1 transaction will provide these companies with four years of retro reinsurance protection against losses from named storms, earthquakes and severe thunderstorms across the United States, Puerto Rico, Canada, the U.S. Virgin Islands and District of Columbia, on an annual aggregate and weighted industry loss basis.
At launch, the Bowline Re 2018-1 Class A notes, which have an initial expected loss of 1.6%, were offered to cat bond investors with coupon price guidance in a range from 4.25% to 4.75%.
We understand that this price guidance has now moved to the middle of the launch range, with the notes now offered to investors with a 4.5% coupon.
TransRe’s first experience of the catastrophe bond market looks set to be an encouraging one, with a larger than initially planned slice of its retrocession now set to be supplied through Bowline Re.
Looking at the experience of other major reinsurers that tap the cat bond market for retrocession, it’s highly possible TransRe could become a major sponsor, bringing repeat deals each year. A positive for this growing marketplace.