Casablanca Re Pte. Ltd. (Series 2020-1)

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

  • Issuer: Casablanca Re Pte. Ltd.
  • Cedent / sponsor: Avatar Property and Casualty Insurance Company
  • Placement / structuring agent/s: GC Securities and GC Securities, a division of MMC Securities LLC, and TigerRisk Capital Markets & Advisory are joint structuring agents & bookrunners
  • Risk modelling / calculation agents etc: AIR Worldwide
  • Risks / perils covered: Florida named storm
  • Size: $65m
  • Trigger type: Indemnity
  • Ratings: NR
  • Date of issue: Jun 2020

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

Florida focused insurer Avatar Property and Casualty Insurance Company has returned to the catastrophe bond market with a currently $65 million Casablanca Re Pte. Ltd. (Series 2020-1) transaction that is being issued out of Singapore.

Casablanca Re Pte. Ltd., a newly established Singapore special purpose reinsurance vehicle, will seek to issue two tranches of Series 2020-1 notes, currently targeting at least $65 million across the pair, with the notes to be sold to cat bond funds and investors and the proceeds used to collateralise reinsurance agreements between the issuing vehicle and sponsor Avatar.

Both tranches of notes will provide Avatar with reinsurance protection against losses from Florida named storms (so tropical storms and hurricanes) across a three-year term.

The area of coverage can be expanded at an annual reset, should Avatar have expanded and want to see coverage in a range of other hurricane exposed U.S. states.

The reinsurance protection will be on an indemnity trigger, cascading and per-occurrence basis, we understand, with the notes exposed to a single larger event, or dropping down for a second and subsequent event.

A Series 2020-1 Class A tranche of notes to be issued by Casablanca Re Pte. are currently sized at $40 million and have an initial expected loss of 1.12%. These notes are being offered to investors with coupon price guidance of 6% to 6.5% we understand.

A Class B tranche of notes are currently sized at $25 million and have an initial expected loss of 2.35%. This tranche are being offered to cat bond investors with price guidance in a range from 8% to 8.5%.

Both tranches attach at $17.5 million, which is the size of sub-layers in the reinsurance tower, but being cascading it would take a named storm loss event that reached at least $157.1 million up Avatar’s tower to trigger them on a first-event basis, or a $68.8 million second or subsequent event, we’ve been told.

Update 1:

We’re told that price guidance has been raised considerably for this catastrophe bond, as ILS investors continue to demand higher returns.

The Series 2020-1 Class A tranche of notes to be issued by Casablanca Re Pte. still target $40 million of coverage and have an initial expected loss of 1.12%. These notes were initially marketed to investors with coupon price guidance of 6% to 6.5%. We’re now told that the price guidance for the Class A notes has been lifted to 7% to 7.5%, around a 16% increase in pricing at the mid-point.

The Class B tranche of notes are still sized at $25 million and have an initial expected loss of 2.35%. This tranche were first offered to cat bond investors with price guidance in a range from 8% to 8.5%. We now understand that the guidance for this tranche has been raised by around 18% at the mid-point, with the new range being 9.5% to 10%.

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