Aragonite Re Ltd. (Series 2024-1)

This is the first catastrophe bond that will benefit Brookfield Property Group with a capital markets backed source of earthquake insurance protection, as the Brookfield Corporation looks to add to its quake insurance arrangements to cover its portfolios of property investments.

The ultimate cedent or insured to this first catastrophe bond for the Brookfield Corporation will be its Brookfield Property Group arm and related entities.

But the company plans to utilise its captive insurer as an intermediary, to front the catastrophe bond issuer for reinsurance and then pass that on as insurance through the Brookfield Property Group insurance arrangements, Artemis has learned.

Aragonite Re Ltd. has been established in Bermuda for the issuance of catastrophe bonds to benefit Brookfield Property Group.

For this first issuance, Aragonite Re Ltd. will look to issue $100 million of Series 2024-1 Class A notes, that will be sold to investors and the proceeds used to collateralize a reinsurance agreement with Obsidian Mutual IC, which is a protected cell of Brookfield’s Vermont based captive insurer Slate Management LLC, we understand.

The protection will then cascade down as insurance to the Brookfield Property Group, covering all of Brookfield’s real estate and property investments.

The Aragonite Re 2024-1 Class A notes are designed to provide a multi-year source of North American named storm and earthquake insurance protection to Brookfield, on a per-occurrence and indemnity trigger protection.

The protection will span the US and Canada, while running across three annual risk periods to March 30th 2027.

The $100 million of Class A notes would attach at $350 million of losses and exhaust coverage at $600 million for US and Canada named storms and earthquake events, aside from for California earthquakes. For California quake events, the attachment point will be $550 million and exhaustion $800 million, we are told by sources.

That gives the notes an initial modelled attachment probability on a combined basis of 0.80%, an initial expected loss of 0.59% and they are being offered to cat bond investors with spread price guidance in a range from 5.75% to 6.50%.

The largest insured value concentrations of the Brookfield property asset portfolio are in New York, California, Texas and Ontario, we understand.

In expected loss terms, California earthquake risk is the biggest contributor at roughly 78% for that section of coverage, while for the other section it is Hawaii and Florida named storms that make up most of the risk, sources said.

Update 1:

We’re told the target size of this debut Aragonite Re catastrophe bond issuance for Brookfield remains at $100 million.

However, the spread guidance has been reduced, with an updated range of 5.5% to 5.75% now offered.

Update 2:

The price guidance was lowered again, with a new range of 5.25% to 5.5% offered, indicating this debut cat bond for Brookfield will be priced below the original guidance.

Update 3:

We are told that Brookfield’s debut Aragonite Re 2024-1 catastrophe bond was priced and finalised at the targeted $100 million in size, while the notes priced at the bottom of the reduced guidance and some 14% below the mid-point of the initial range, to pay investors a spread of 5.25%.