Four Lakes Re Ltd. (Series 2023-1)

This is the sixth catastrophe bond from US insurer American Family Mutual Insurance Company that we have listed in our Deal Directory. It is the fourth Four Lakes Re catastrophe bond from the company, having sponsored an issuance every years since 2020.

For this 2023 cat bond, AmFam is using the same Bermuda based Four Lakes Re Ltd. special purpose insurer, with the vehicle set to offer two tranches of notes to investors, we understand.

Across the deal, AmFam is aiming to secure at least $150 million in multi-peril US catastrophe reinsurance protection, covering it and its subsidiaries against losses from US named storms, earthquakes, severe thunderstorms, winter storms and wildfires, the same range of perils as its cat bond issuance of a year ago.

The Four Lakes Re 2023-1 cat bond notes will provide AmFam with per-occurrence and indemnity trigger based reinsurance, across a three calendar year term, from January 2024 to the end of December 2026, we are told.

A currently $100 million Class A tranche of notes have an attachment point at $2 billion of losses and will cover a share up to $3 billion, giving them an initial attachment probability of 0.71%, an initial expected loss of 0.63% and these notes have spread price guidance in a range from 5% to 5.75%, we understand.

A currently $50 million Class B tranche of notes would attach lower down at $950 million of losses, exhausting at $1.5 billion, so are riskier, giving them an initial attachment probability of 4.19%, an initial expected loss of 2.44% and these notes have spread price guidance in a range from 9% to 9.75%, it’s said.

Update 1:

AmFam is now on-track to secure $175 million in reinsurance from this new Four Lakes Re 2023-1 catastrophe bond issuance.

What was a $100 million Class A tranche of notes are now sized at $125 million, we understand.

The Class A notes have an initial expected loss of 0.63% and were first offered with spread price guidance in a range from 5% to 5.75%, but we’re now told the price guidance has been fixed at the upper-end of 5.75%.

The Class B tranche of notes remains $50 million in size.

The Class B notes are riskier with initial expected loss of 2.44% and were first offered to investors with spread price guidance in a range from 9% to 9.75%, but we’re now told this guidance has been fixed at 9.5%.