Swiss Re Insurance-Linked Fund Management

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Four Lakes Re Ltd. (Series 2021-1)

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Four Lakes Re Ltd. (Series 2021-1) – 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, winter storm, wildfire, volcanic eruption, meteorite impact
  • Size: $125m
  • Trigger type: Indemnity
  • Ratings: NR
  • Date of issue: Dec 2021

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

This is the second Four Lakes Re Ltd. catastrophe bond to be sponsored by American Family Mutual Insurance Company, following on from a $175 million issuance in 2020.

It’s actually American Family Mutual Insurance Company’s fourth catastrophe bond series though, as the insurer had sponsored the fated Mariah Re issues back in 2010 that were both impacted by tornado losses.

With its second Four Lakes Re Ltd. catastrophe bond, American Family (AmFam) is seeing $100 million or more in reinsurance to cover some of its losses from multiple perils across the United States.

The coverage will run across a three-year period to the end of 2024, we understand, and the cat bond notes will feature an indemnity and per-occurrence trigger arrangement.

The sale of the notes will a collateralize reinsurance agreement between Four Lakes Re Ltd. and AmFam, covering it for losses from named storms, earthquakes, severe thunderstorms, winter storms, wildfires, volcanic eruptions and meteorite impacts across the United States.

Four Lakes Re Ltd. will issue a single, currently $100 million tranche of Series 2021-1 Class A notes, that will attach at $1.05 billion of losses to AmFam and exhaust their coverage at $1.45 billion, giving them room to upsize should the sponsor elect to.

The Class A notes will have an initial attachment probability of 2.07%, an initial expected loss of 1.37% and are being offered to cat bond investors with price guidance in a range from 4.5% to 5.25%, we’re told.

Update 1:

We understand that American Family is aiming to upsize this Four Lakes Re 2021-1 catastrophe bond issuance to $125 million in size.

At the same time, sources said the pricing was fixed in the bottom-half of guidance at 4.75%.

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