Swiss Re Insurance-Linked Fund Management

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Finca Re Ltd. (Series 2022-1)

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

  • Issuer: Finca Re Ltd.
  • Cedent / sponsor: Canopius Group
  • Placement / structuring agent/s: Aon Securities is sole structuring agent and bookrunner
  • Risk modelling / calculation agents etc: AIR Worldwide
  • Risks / perils covered: US named storm and earthquake
  • Size: $75m
  • Trigger type: Industry loss index
  • Ratings: NR
  • Date of issue: Jul 2022

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

This Finca Re Ltd. Series 2022-1 catastrophe bond issuance marks the cat bond market debut for the Canopius Group, as the specialty insurance and reinsurance underwriter looks to bring the capital markets into its catastrophe reinsurance program through its first 144A securitized insurance-linked transaction.

Finca Re Ltd. has been established in Bermuda and is expected to be licensed as a special purpose insurer (SPI) for the issuance of series of catastrophe bond notes.

For its first issuance, Finca Re Ltd. will seek to issue a $75 million or larger tranche of Series 202-1 Class A notes, that will be sold to cat bond funds and investors, with the proceeds set to be used to collateralize a source of multi-year retro reinsurance for the company.

We’re told the Finca Re 2022-1 cat bond will ultimate protect Canopius’ underwriting entities, Canopius Re, Canopius US Insurance, Canopius Managing Agents and its Lloyd’s syndicates 4444 and 1861.

The cat bond coverage will run across a nearly three-year term for Canopius, to the end of May 2025, providing it with multi-year protection against losses from US named storms and earthquakes (including Puerto Rico and the US Virgin Islands), we understand.

The notes will provide their retro reinsurance protection on a weighted industry loss trigger basis, while the coverage will be annual aggregate in nature, sources told us, while qualifying loss events must surpass an index franchise deductible of $15 million.

We’re told the Finca Re cat bond’s expected loss implies this to be a roughly 75% named storm, 25% earthquake bond, while the US named storm protection expected loss is weighted around 50% towards Florida and Texas and the quake exposure is majority California focused.

The $75 million, or more, in Series 2022-1 Class A notes that Finca Re Ltd. will issue come with an initial attachment point of 2.47%, an initial base expected loss of 1.82% and are being offered to cat bond investors with price guidance of 7.25% to 7.75%, Artemis understands.

Update 1:

We understand that this first Finca Re catastrophe bond from Canopius did not change in size, so will secure the company $75 million of peak US peril catastrophe reinsurance protection from the capital markets.

The $75 million of Series 2022-1 Class A notes were eventually priced to pay investors a coupon of 7.75%, so at the upper-end of guidance.

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