Swiss Re Insurance-Linked Fund Management

PCS - Emerging Risks, New Opportunities

Four Lakes Re Ltd. (Series 2020-1)

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Four Lakes Re Ltd. (Series 2020-1) – At a glance:

  • Issuer: Four Lakes Re Ltd.
  • Cedent / sponsor: American Family Mutual Insurance Co.
  • Placement / structuring agent/s: Aon Securities is sole structuring agent and bookrunner
  • Risk modelling / calculation agents etc: AIR Worldwide
  • Risks / perils covered: U.S named storm, earthquake, severe thunderstorm, wildfire, winter storm, volcanic eruption, meteorite impact
  • Size: $175m
  • Trigger type: Indemnity
  • Ratings: NR
  • Date of issue: Nov 2020

Four Lakes Re Ltd. (Series 2020-1) – Full details:

This is the first catastrophe bond to be sponsored by American Family Mutual Insurance Company since late 2010.

Four Lakes Re Ltd. has been established as a Bermuda based special purpose insurer for issuing cat bonds on behalf of American Family (AmFam).

For this first issuance, Four Lakes Re Ltd. will seek to issue two tranches of catastrophe bond notes, that will be sold to cat bond investors and the proceeds used to collateralize the underlying reinsurance agreements between the issuer and AmFam.

The Four Lakes Re 2020-1 catastrophe bond will provide AmFam with a just over three-year source of catastrophe reinsurance protection from the capital markets, covering certain losses caused by multiple U.S. perils, including U.S named storm, earthquake, severe thunderstorm, winter storm, volcanic eruption, and meteorite impact.

Coverage is across the entire 50 U.S. states and D.C., on an indemnity and per-occurrence basis, we understand from our sources.

The deal features a currently $75 million Class A tranche of notes, that Four Lakes Re Ltd. will issue to investors. The Class A tranche is the less risky of two, having an initial expected loss of 2.28% and being offered with coupon guidance in a range from 6.5% to 7.25%, we’re told.

The riskier Class B tranche of notes to be issued by Four Lakes Re Ltd., are also seeking $75 million in terms of sizing. The initial expected loss of the Class B notes is 3.71% and these are offered to cat bond investors with price guidance ranging from 8.75% to 9.5%, we understand.

Maturity for both tranches is slated for the beginning of January 2024, suggesting over three-years of coverage and perhaps importantly for AmFam, that would include four winter storm seasons.

Update 1:

We understand the target for this first Four Lakes Re Ltd. catastrophe bond issue was upsized to $175 million thanks to investor demand.

The Class A tranche has upsized to $100 million, with pricing at the mid-point of guidance at 7%.

The riskier Class B tranche remained at $75 million and its pricing moved higher, to the top-end of initial guidance at 9.5%.

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