Swiss Re Insurance-Linked Fund Management

PCS - Emerging Risks, New Opportunities

Bonanza Re Ltd. (Series 2021-1)

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Bonanza Re Ltd. (Series 2021-1) – 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: $80m
  • Trigger type: Indemnity
  • Ratings: NR
  • Date of issue: Dec 2021

Bonanza Re Ltd. (Series 2021-1) – Full details:

This is the first catastrophe bond of 2021 that will benefit American Strategic Insurance Group entities, which are owned by ARX Holding, a subsidiary of Progressive.

Bonanza Re Ltd., a Bermuda domiciled special purpose insurer (SPI), will look to issue two tranches of Series 2021-1 notes for its first catastrophe bond deal of the year.

At the moment we know that one tranche of notes is seeking $100 million of reinsurance for American Strategic’s insurance entities, but the second tranche is said to be unsized at this time.

Both tranches of notes are being offered as zero-coupon discount notes, we’re told.

The Series 2021-1 cat bond notes from Bonanza Re will provide the sponsor with just a one-year source of annual aggregate and multi-peril reinsurance protection, sources have told us, with a risk period running the duration of 2022.

Both tranches of notes will cover losses from U.S. named storms, severe thunderstorms, winter storms, wildfires and earthquakes, on an indemnity trigger basis.

Bonanza Re Ltd. will issue a $100 million Class B tranche of notes, that would attach at $650 million of losses, spanning a $100 million layer of the reinsurance tower.

That gives the Class B notes an initial expected loss of 0.32% and they are being offered to investors with pricing in a range of 89% to 88% of par, which equates to a roughly 11% to 12% coupon, we understand.

An unsized Class C tranche of notes is also being offered, that would sit below the Class A layer and attach at $575 million of notes, covering losses to $650 million.

That gives the Class C tranche of notes an initial expected loss of 1.28%, we’re told, so they are the riskier layer. But we understand no pricing guidance has been given on this tranche at this time.

In order for losses to qualify we understand there is a $2 million franchise deductible per-event, while the maximum loss any qualifying event can contribute is said to be $98 million.

Update 1:

We’re now told that the riskier Class C tranche of notes is unlikely to be issued, which perhaps means it will be privately placed or transacted as reinsurance instead.

The Class B tranche is now targeting between $75 million and $100 million of cover for the sponsor, while the pricing has increased to 87% of par, which equates to a coupon of 13%.

Update 2:

The Bonanza Re 2021-1 cat bond eventually settled at $80 million in size, with just the Class B tranche of notes being issued.

The pricing remained at the raised 87% of par level.

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