Swiss Re Insurance-Linked Fund Management

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Bonanza Re Ltd. (Series 2020-1)

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Bonanza Re Ltd. (Series 2020-1) – At a glance:

  • Issuer: Bonanza Re Ltd.
  • Cedent / sponsor: American Strategic Insurance Group
  • Placement / structuring agent/s: Willis Re Securities is sole structuring agent & bookrunner
  • Risk modelling / calculation agents etc: AIR Worldwide
  • Risks / perils covered: U.S. named storms, severe thunderstorms, winter storms, wildfires, earthquakes
  • Size: $200m
  • Trigger type: Indemnity
  • Ratings: NR
  • Date of issue: Feb 2020

Bonanza Re Ltd. (Series 2020-1) – Full details:

American Strategic Insurance Group has returned to the catastrophe bond market for its second transaction under the Bonanza Re program, with a $100 million or greater Bonanza Re Ltd. (Series 2020-1) U.S. multi-peril deal.

For its new Bonanza Re 2020-1 catastrophe bond, we’re told that American Strategic is seeking reinsurance protection across an expanded range of perils, covering certain losses from U.S. named storms, severe thunderstorms, winter storms, wildfires and earthquakes, on a per-occurrence and cascading basis, but over four hurricane seasons and almost four years, coming on-risk from June 2020 and running to February 2024.

It’s important to note that this is extremely weighted towards named storm coverage, we understand, making up the majority of the expected loss for the notes (compared to the other perils).

Coverage is for the entire United States, but again it is important to note that more than three-quarters of the expected loss by location is weighted at Florida, we’re told, reflecting the named storm focus.

Bonanza Re Ltd. will issue a single tranche of Series 2020-1 Class A notes, currently sized at $100 million, that will be sold to cat bond funds and investors and the proceeds used to collateralise underlying reinsurance agreements between the issuing vehicle and American Strategic.

The reinsurance protection will benefit American Strategic across its group and subsidiaries, including its Lloyd’s underwriting activities, we understand.

The notes will feature an indemnity trigger and coverage is on a per-occurrence and cascading basis, with the coverage set to sit at the top of the American Strategic reinsurance tower, but with layers beneath inuring to it so that it will drop-down as lower layers of protection are eroded by losses.

The $100 million or more of Series 2020-1 Class A notes issued by Bonanza Re Ltd. will have an initial attachment probability of 1.15%, an initial expected loss of 1.03% and are being offered to cat bond investors with price guidance in a range from 4.25% to 4.75%, we understand.

The notes will cover a $200 million layer of American Strategic’s reinsurance tower, so there is room for this cat bond to increase in size to fill that sliver of the program.

Update 1:

The latest catastrophe bond from American Strategic has doubled in size to become a $200 million issuance while marketing.

At the same time pricing for the now $200 million of Series 2020-1 Class A notes to be issued by Bonanza Re Ltd. settled at the top-end of guidance, at 4.75%.

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