Atlas Capital DAC (Series 2024-1)

Global reinsurer SCOR has returned to the catastrophe bond market with what will be its eighteenth issuance under an Atlas name, since it sponsored its first right back in the year 2000.

The reinsurer has been a regular user of catastrophe bonds within its retrocessional reinsurance program, alongside other forms of traditional and capital markets capacity.

For this new 2024 cat bond, SCOR is using the Ireland-based designated activity company named Atlas Capital DAC, which it used a year ago for its last deal.

Atlas Capital DAC is offering investors a single tranche of Series 2024-1 Class A catastrophe bonds notes that will be sold and the proceeds used to collateralize a retrocessional reinsurance agreement between the vehicle and SCOR SE, Artemis has learned.

The issuance is preliminarily sized at $125 million, we understand, but with SCOR’s maturing 2020 cat bond having provided it $200 million of retrocession for the same perils, we suspect there is every chance this new Atlas Capital 2024 cat bond gets upsized, given investor appetite of late.

This Atlas Capital DAC 2024-1 catastrophe bond will provide SCOR with a three-year source of annual aggregate and state-weighted industry loss trigger based retro reinsurance protection, over a roughly three year term to the end of May 2027, sources said.

The covered perils and regions are said to be US named storm and earthquake risk, as well as Canada earthquake industry-loss events.

We’re told the PCS index attachment point for these notes will be at 1,170 index points, with exhaustion at 1,470 index points, but that qualifying events must surpass an event deductible of 70 index points to count towards the aggregate tally.

The single currently $125 million tranche of Series 2024-1 cat bond notes that Atlas Capital DAC is set to issue have an initial attachment probability of 4.54%, an initial base expected loss of 3.87% and are being marketed to cat bond funds and investors with price guidance in a range from 11% to 12%, we are told.

Update 1:

We’re told SCOR has adjusted some terms of its new Atlas Capital DAC (Series 2024-1) catastrophe bond issuance, as the company has reduced the risk somewhat in an effort to manage pricing, while also lifting the target size to as much as $175m.

SCOR has adjusted some of the payout factors for its new cat bond deal, specifically the fact that now no named storm or earthquake payout factor can exceed 10%, while in addition the payout factor for Puerto Rico named storms is capped at 1.5%, we’re told.

That has the effect of lowering exposure concentrations for the cat bond notes, while reducing their likelihood of attachment somewhat.

We’re now told that the $125 million to $175 million of Atlas Capital DAC 2024-1 Class A catastrophe bond notes have an initial attachment probability of 3.88% and an initial base expected loss of 3.26%, so lower than the launch figures (described further up).

With the risk lowered you might have thought the price guidance would be too, but, reflecting the widening of spreads and rising prices for catastrophe bond coverage that we’ve seen of late, we’re now told these notes are being marketed with price guidance of 13%, so higher than the initially offered range of 11% to 12%.

Update 2:

Subsequently, we were told that the spread guidance was updated again and put back to a range of 12.5% to 13%, with the size target fixed at $175m.

Update 3:

At final pricing SCOR secured the upsized $175 million of retrocession from this new Atlas Capital 2024-1 catastrophe bond, while the notes were priced at 12.5%, so still above the initial guidance but it seems the reduction in risk metrics helped SCOR secure the cover at a more acceptable price.