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Bowline Re Ltd. (Series 2022-1)

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Bowline Re Ltd. (Series 2022-1) – At a glance:

  • Issuer: Bowline Re Ltd.
  • Cedent / sponsor: Transatlantic Reinsurance Co.
  • Placement / structuring agent/s: Aon Securities is sole structuring agent and bookrunner
  • Risk modelling / calculation agents etc: AIR Worldwide
  • Risks / perils covered: U.S., Puerto Rico, U.S. Virgin Islands, D.C., Canada named storm and earthquake. Japan earthquake
  • Size: $165m
  • Trigger type: Industry loss index
  • Ratings: NR
  • Date of issue: May 2022

Bowline Re Ltd. (Series 2022-1) – Full details:

This is the third catastrophe bond issuance from Transatlantic Holdings, the Alleghany Corporation owned parent company to Transatlantic Reinsurance (or TransRe).

It follows Bowline Re cat bond issuances in 2018 and 2019 that secured TransRe and subsidiaries multi-year retrocessional reinsurance protection to cover multiple US perils.

For 2022, this new Bowline Re Ltd. Series 2022-1 catastrophe bond issuance features three tranches of notes and for the first time TransRe has incorporated an international peril, as well as the United States, into one tranche of the cat bond.

Bermuda-based special purpose insurer (SPI) Bowline Re Ltd. will seek to issue three tranches of Series 2022-1 cat bond notes, that will be sold to investors and the proceeds used to collateralize underlying retro reinsurance agreements between Transatlantic and Bowline Re.

The cat bonds will protect TransRe’s business across all of its main underwriting vehicles, including its US, London and European entities, we understand.

So it will cover business ceded from Transatlantic Reinsurance Company and subsidiaries including TransRe London, TransRe Europe, Fair American Insurance and Reinsurance Company and Fair American Select, as well as any additional subsidiaries or affiliates that it could add in future.

With this new Bowline Re 2022-1 cat bond, TransRe is seeking three years of both annual aggregate and per-occurrence retrocessional reinsurance protection, on an industry loss trigger basis, across the three as yet unsized tranches of notes.

A Class A tranche of notes will provide TransRe with annual aggregate protection against losses from U.S., Puerto Rico, U.S. Virgin Islands, D.C., Canada named storm and earthquake risks, on a territory and business line weighted industry loss trigger basis.

The Class A notes have an initial attachment probability of 2.3%, an initial expected loss of 2.01% and are being marketed to investors with price guidance in a range from 5.75% to 6%, we’re told.

A Class B tranche of notes cover the same perils on the same aggregate and industry index basis as the A’s, but at a much riskier, lower level in TransRe’s retro reinsurance tower.

The Class B notes have an initial attachment probability of 8.27%, an initial expected loss of 6.85% and are being marketed to investors with price guidance in a range from 15.75% to 16.5%.

Both Class A and B tranches feature a franchise deductible per-qualifying loss event.

Finally, a Class C tranche will provide TransRe with per-occurrence retro reinsurance protection against losses from Northeast US named storms and earthquakes, as well as Japanese earthquakes, on a weighted industry loss index trigger basis.

The Class C per-occurrence notes will have an initial attachment probability of 5.3%, an initial expected loss of 3.57% and are being marketed to investors with price guidance in a range from 7% to 7.5%, our sources said.

Update 1:

$175 million now looks set to be the maximum size for this new catastrophe bond from TransRe, as all three tranches have now been given ranges that would take it up to that amount.

At the same time, the coupons for all three tranches have been lifted up to above the initial guidance.

The latest tranche size and price guidance is below:

  • Class A – $40m to $50m; 6.25% to 6.5%.
  • Class B – $50m to $75m; 17%.
  • Class C – $50m; 7.75% to 8%.

Update 2:

At pricing, TransRe secured $165 million of protection from its new Bowline Re 2022-1 catastrophe bond deal.

The finalised tranche sizes and coupons pricing is below:

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  • Class A – $40m; 6.35%.
  • Class B – $75m; 17%.
  • Class C – $50m; 7.75%.
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