Atela Re Ltd. (Series 2024-1)

This new Atela Re Ltd. Series 2024-1 catastrophe bond issuance will provide a source of industry-loss based retrocessional reinsurance protection from the capital markets to ILS manager Nephila Capital’s underwriting vehicle in the Lloyd’s market, Syndicate 2357.

We understand Nephila Syndicate Management Limited will be the ultimate ceding reinsurer to the deal, acting on behalf of its flagship Lloyd’s of London syndicate.

The notes will provide industry-loss index trigger based protection for US named storm and US earthquake events to the syndicate 2357 portfolio.

Atela Re Ltd. has been established in Bermuda to be the issuer for this first Series 2024-1 catastrophe bond for Nephila.

The ceding reinsurer for the Atela Re 2024-1 cat bond will be Nephila Syndicate Management Limited, the Lloyd’s managing agent that operates two syndicates for Nephila’s ILS strategies.

But the coverage is only for Lloyd’s Syndicate 2357, which is Nephila’s longest-standing underwriting operation in the Lloyd’s market and as we recently reported came through 2023 with a combined ratio that was market-beating.

Atela Re Ltd. will issue two tranches of Series 2024-1 cat bond notes, with a target issuance size of $100 million across the two layers of retrocessional reinsurance coverage, we understand.

The notes will ultimately provide syndicate 2357, via Nephila Syndicate Management, with a three year source of annual aggregate and industry loss index based retro reinsurance protection.

The Atela Re cat bond notes will provide protection against major industry losses from US named storms and US earthquakes, with PCS the reporting agent for insured industry events, sources said.

We’re told that a franchise deductible will be in place for both perils, based on an index point level of 300m for each.

In terms of where the risk is most concentrated, we understand that Florida named storm is the largest exposure of both tranches of notes, at more than half in each case, after which comes California earthquake, Texas named storms and Louisiana named storms, but with those all below a 10% contribution of expected loss to either tranche of notes. So Florida hurricanes are the main exposure to these notes.

As said, the target for this cat bond is to source $100 million of industry-loss based retro nat cat protection from the two tranches of notes and at this stage the tranches themselves do not have target sizes, we understand.

The Class A tranche of notes have an initial attachment probability of 6.66%, an initial expected loss of 5.15% and are being offered to investors with price guidance in a range from 11.25% to 12.25%, sources said.

The Class B tranche are riskier, having an initial attachment probability of 11.73%, an initial expected loss of 8.36% and are being offered to investors with price guidance in a range from 18.25% to 19.25%.

Update 1:

We’re now told that the target size for this Atela Re 2024-1 catastrophe bond issuance is expected to be between $90 million and $110 million, so on target.

The Class A tranche of notes are being offered at between $60 million and $70 million in size, we are told.

The Class A notes have an initial base expected loss of 5.15% and were first offered to investors with price guidance in a range from 11.25% to 12.25%, but we’re now told that guidance has been hiked by 21% from the mid-point of that range, to now be offered with new spread guidance of 14.25%,

The Class B tranche are the riskier layer and we’re told are sized at between $30 million and $40 million.

The Class B notes have an initial base expected loss of 8.36% and were initially offered to investors with price guidance in a range from 18.25% to 19.25%, but that too has been hiked higher by some 17% from the mid-point of that range, to now be offered with spread guidance of 22%.

Update 2:

We understand that the Atela Re 2024-1 catastrophe bond issuance has now been finalised to provide Nephila Capital $90 million of industry-loss based retrocessional protection for its flagship Lloyd’s syndicate 2357.

The Class A notes settled at $60 million in size, priced at 14.25%.

The Class B notes settled at $30 million in size, priced at 22%.