Charles River Re Ltd. (Series 2024-1)

This is a debut catastrophe bond for American European Insurance Company which sources the subject business to this catastrophe bond via its relationship with ShoreOne Insurance Managers, a coastal property specialist that includes flood in its policies.

Charles River Re Ltd. has been established in Bermuda to issue a single tranche of Series 2024-1 cat bond notes, that are designed to provide American European with a multi-year source of named storm reinsurance, across a three-year term up until April 30th 2027.

The issuance is targeted at $100 million in size and the Class A notes on offer will provide named storm reinsurance on a per-occurrence and indemnity trigger basis, covering loss events in the states of Massachusetts, New Jersey, New York and South Carolina, we understand.

The coverage will run across three annual risk periods that begin on May 1st, we are told and additional covered areas can be added at annual resets, with Rhode Island said to be one of them.

The $100 million of Class A notes can attach at $175 million of losses to American European Insurance and exhaust at $300 million of losses, giving them an initial attachment probability of 2.71% and an initial expected loss of 1.87%.

The notes are offered with spread pricing in a range from 7% to 7.5%, we understand.

Despite the fact ShoreOne specialises in offering property insurance policies that always include flood cover, we’re told that in terms of expected loss contribution, it is wind that makes up the majority, followed by surge, while rainfall linked flooding is a minor contributor at well below 1%.

Update 1:

We’re told that American European’s target for this debut Charles River Re catastrophe bond has now risen to as much as $125 million, while the price guidance range has been lowered to 6.75% to 7%.

Update 2:

We now understand that the size target is fixed at the larger $125 million, while the price guidance for these notes has been reduced again, to a new range of 6.5% to 6.75%.

Update 3:

American European secured the upsized $125 million of reinsurance from its debut Charles River Re catastrophe bond, while the pricing for the Series 2024-1 Class A notes was finalised at 6.5%, so the low-end of twice reduced guidance and roughly 10% down on the initial mid-point.