Fidus Re Ltd. (Series 2021-1)

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Fidus Re Ltd. (Series 2021-1) – At a glance:

  • Issuer: Fidus Re Ltd.
  • Cedent / sponsor: Build America Mutual Assurance Company
  • Placement / structuring agent/s: Unknown
  • Risk modelling / calculation agents etc: Unknown
  • Risks / perils covered: Financial guarantee risks
  • Size: $150m
  • Trigger type: Indemnity
  • Ratings: KBRA: 'AA'
  • Date of issue: Feb 2021

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

This is the second Fidus Re Ltd. securitization of financial guarantee insurance risks by specialist financial guarantee insurer Build America Mutual Assurance Company.

The company has transferred $150 million of financial guarantee risks to capital market investors through a catastrophe bond-like insurance-linked securities (ILS) arrangement, a larger transaction than its first $100 million Fidus Re Ltd. (Series 2018-1) deal.

Fidus Re Ltd. is a Bermuda special purpose insurer (SPI) set up to issue and sell notes to investors, with the proceeds used to collateralize an excess of loss reinsurance agreement between Fidus Re and the sponsor, Build America Mutual Assurance Company.

For its second issuance, Fidus Re Ltd. issued a $150 million tranche of Series 2021-1 Class A notes, that were sold to investors.

The notes have a roughly twelve-year term, just like the first Fidus Re financial guarantee ILS deal, so provide the sponsor with reinsurance across a long duration.

Build America Mutual (BAM) said that the $150 million of fully collateralized reinsurance secured from Fidus Re Ltd. effectively expands its claims-paying resources to more than $1.1 billion.

“The substantial growth in claims-paying resources is the result of the continued execution of our long-term capital plan, which allows BAM to build unparalleled financial strength both through organic growth and periodically accessing the capital markets,” explained Seán W. McCarthy, Chief Executive Officer of BAM.

The 2018 financial guarantee ILS arrangement remains in force as well, so now BAM has $250 million of financial guarantee reinsurance, on a fully-collateralized and long-term basis from the capital markets and funded through the sale of insurance-linked notes through Fidus Re.

The new $150 million of 2021-1 notes issued by Fidus Re Ltd. will provide BAM with reinsurance against losses on a pre-defined portion of Build America Mutual Assurance Company’s financial guarantee insurance portfolio.

The Fidus Re 2021-1 ILS arrangement will cover 90% BAM’s claims on that portfolio, excess of $135 million, on an aggregate basis.

The subject business covered is made up of scheduled principal and interest payment on select bonds which were insured by BAM prior to October 31st 2020.

Interestingly, the subject business excludes any exposure thought to have had an elevated risk due to the COVID-19 pandemic.

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