Astro Re Pte. Ltd. (Series 2021-1)

U.S. primary insurance group Frontline Insurance is back for its second catastrophe bond issuance, with the carrier seeking a $100 million or greater source of named storm reinsurance protection for itself and subsidiary First Protective from this Astro Re Pte. Ltd. (Series 2021-1) deal.

Frontline has benefited from the reinsurance provided by its first catastrophe bond, with the Frontline Re 2018 transaction helping by absorbing some of its losses from hurricane Michael as loss creep drove recoveries.

Now, the company has returned and is using Singapore as a domicile for this latest issuance, with a special purpose reinsurance vehicle (SPRV) named Astro Re Pte. Ltd. registered for this cat bond transaction.

Astro Re Pte. Ltd. will issue a single Series 2021-1 Class A tranche of notes, currently sized at $100 million and these notes will be sold to investors and the proceeds used to collateralize a reinsurance agreement to cover Frontline and First Protective.

The reinsurance coverage will be for named storm losses affecting the states of Florida, Alabama, Georgia, North Carolina and South Carolina, on an indemnity trigger and per-occurrence basis, across a four-year term to July 2025.

The $100 million of notes to be issued by Astro Re Pte. will have an initial expected loss of 2.9% and are being marketed to cat bond investors with price guidance in a range from 7.25% to 8%, we understand.

At that level of expected loss we suspect the cat bond will sit close to, or alongside, the FHCF backed reinsurance coverage that Frontline has, likely towards thee upper-end of this, or even on top of it.

As a reminder, Frontline Re, the sponsors last cat bond deal, has been facing losses due to 2018’s hurricane Michael.

Update 1:

Sources told us this transaction was delayed during its marketing and so will fall into July for its issuance.

Update 2:

We’re told that this issuance has now shrunk to become just a $40 million tranche of notes. The remainder of the layer is said to be getting covered by traditional or collateralised reinsurance instead.

At the same time, we’re told the notes have now been priced with a coupon of 8%, so the upper-end of guidance and representing a higher multiple than many other recent cat bond deals.

Update – July 2024:

Having been marked down to very low bid levels right after 2022’s hurricane Ian, these notes recovered back to only be marked down 10% to 25% by the second-quarter of 2024.

But, in July 2024, the notes were marked down further, we’re told due to rising estimate of ultimate net losses from hurricane Ian from the sponsors. Cat bond pricing sheets have them marked down for a potential 50% to 75% loss of principal after these updates, we are told.