Swiss Re Insurance-Linked Fund Management

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Eclipse Re Ltd. (Series 2018-01A)

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Eclipse Re Ltd. (Series 2018-01A) – At a glance:

  • Issuer: Eclipse Re Ltd. (Series 2018-01A)
  • Cedent / sponsor: U.S. Coastal Insurance Company
  • Placement / structuring agent/s: Rewire Securities acted as bookrunner
  • Risk modelling / calculation agents etc: Unknown
  • Risks / perils covered: U.S. property catastrophe risks
  • Size: $53.3m
  • Trigger type: Indemnity
  • Ratings: NR
  • Date of issue: May 2018

Eclipse Re Ltd. (Series 2018-01A) – Full details:

This is the latest issuance of a private series of catastrophe bond notes through the Eclipse Re Ltd. collateralized reinsurance note platform.

This new transaction sees three tranches of Series 2018-01A notes issued, totaling $53.3 million and with each tranche corresponding to a single segregated account and a separate reinsurance contract within each.

The first is a $4.8 million Series 2018-01A Notes – SAC EC0010 tranche. The second, a $10.5 million Series 2018-01A Notes – SAC EC0011 tranche. Finally, the largest is a $38 million Series 2018-01A Notes – SAC EC0012 tranche.

All three tranches of notes issued by Eclipse Re Ltd. have been admitted for listing on the Bermuda Stock Exchange (BSX) as Insurance Related Securities.

The maturity date is set as the 1st July 2019, so the transaction likely features the collateralization of reinsurance arrangements covering just around a one year term, so likely transacted for a mid-year renewal.

The $53.3 million of Eclipse Re 2018-01A notes were privately placed with qualified investors, with we assume Rewire Securities acting as the bookrunner for the transaction.

Horseshoe Group acted as the listing sponsor, through its Horseshoe Corporate Services entity.

Sources told Artemis that the sponsor behind this transaction is a U.S. based primary insurer, that the perils ceded are U.S. property catastrophe risks and that the deal features an indemnity trigger.

We also understand that the sponsor is likely the same as the sponsor of the $53.3 million Eclipse Re Ltd. (Series 2017-02A) transaction, which had exactly the same tranche sizes and was issued a year earlier. It’s likely this new Eclipse Re deal is a renewal of that 2017 transaction.

Update 1:

Sources told us that U.S. Coastal Insurance Company is the sponsor of this Eclipse Re private catastrophe bond.

The 2018 reinsurance program has been designed to cover U.S. Coastal up to $250 million of losses and we understand that the three tranches of notes issued under the Eclipse Re 2018-01A transaction sit on top of each other and have cascading features, so that they drop down to replace eroded coverage for second and subsequent catastrophe events.

Here’s how we understand the three Series 2018-01A tranches of notes to be position.

Beneath the collateralized coverage provided by the Eclipse Re private cat bond U.S. Coastal has a $2 million retention and then a $7 million inuring layer of traditional reinsurance, both of which have to be eroded before the collateralized layers begin to cascade down.

The first $4.8 million of SAC EC0010 tranche attaches at $9 million of losses, covering 30% of a $16 million layer, and pays investors a net rate on-line equivalent of 7.5%, we understand.

The second $10.5 million SAC EC0011 tranche sits above that, attaching at $25 million and covering 30% of losses up to $60 million, while paying investors a rate on-line equivalent of 5%, our sources said.

The final and largest $38 million SAC EC0012 tranche is at the top, attaching at $60 million of losses and again covering 30% of the $190 million layer up to the top of the program at $250 million. This tranche pays investors a rate on-line equivalent of 3.25%, we are told.

We’re also told that U.S. Coastal was the sponsor of 2017’s also $53.3 million Eclipse Re Ltd. (Series 2017-02A) transaction, with this new issuance a renewal of that ILS market provided reinsurance protection for the insurer.

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