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Four Lakes Re Ltd. (Series 2022-1)

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Four Lakes Re Ltd. (Series 2022-1) – 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
  • Size: $100m
  • Trigger type: Indemnity
  • Ratings: NR
  • Date of issue: Dec 2022

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

This is the third catastrophe bond in the Four Lakes Re Ltd. series of deals to be sponsored by American Family Mutual Insurance Company, following on from a $175 million issuance in 2020 and a $125 million issuance a year ago.

American Family Mutual Insurance Company had previously sponsored the fated Mariah Re catastrophe bonds back in 2010, that were both triggered by tornado losses.

Special purpose insurer Four Lakes Re Ltd. will look to issue a single tranche of Series 2022-1 Class A notes that will be sold to investors and the proceeds used to collateralize an underlying reinsurance agreement with AmFam, Artemis is told.

The issuance is targeted at $100 million or more in size and the coverage from the notes will run across a roughly three-year term to the end of 2025, we understand.

The notes will provide AmFam with reinsurance protection, on an indemnity trigger and per-occurrence basis, against losses from named storms, earthquakes, severe thunderstorms, winter storms and wildfires across the United States.

That’s a slightly shorter list of perils than the previous two Four Lakes Re cat bonds, which also provided coverage for the less well-modelled volcanic eruptions and meteorite impacts.

The currently $100 million tranche of Series 2022-1 Class A notes that Four Lakes Re Ltd. is issuing, will have an initial attachment point at $1.96 billion of losses to AmFam and exhaust their coverage at $2.46 billion, we’re told.

The Class A notes come with an initial attachment probability of 1.63%, an initial base expected loss of 0.49% and are being marketed to cat bond investors with price guidance in a range from 6% to 6.5%, sources said.

Update 1:

AmFam is aiming to upsize this Four Lakes Re 2022-1 catastrophe bond to $125 million in size, while the pricing has moved to the upper-end of initial guidance, to pay investors a coupon of 6.5%.

Update 2:

In the end, American Family Mutual Insurance (AmFam) failed to upsize on this Four Lakes Re 2022-1 catastrophe bond.

The issuance was settled at the initial $100 million target size, while the Class A notes with their initial base expected loss of 0.49% priced to offer investors a coupon of 6.5%, so providing a multiple-at-market of almost 13.3 times the base expected loss.

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