Swiss Re Insurance-Linked Fund Management

PCS - Emerging Risks, New Opportunities

Galileo Re Ltd. (Series 2013-1)

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Galileo Re Ltd. (Series 2013-1) – At a glance:

  • Issuer: Galileo Re Ltd. (Series 2013-1)
  • Cedent / sponsor: Catlin
  • Placement / structuring agent/s: Willis Capital Markets & Advisory are structuring agent and bookrunner
  • Risk modelling / calculation agents etc: AIR Worldwide
  • Risks / perils covered: U.S. named storms, U.S. earthquake, Canada earthquake, European windstorm
  • Size: $300m
  • Trigger type: Industry loss index
  • Ratings: NR
  • Date of issue: Oct 2013

Galileo Re Ltd. (Series 2013-1) – Full details:

Galileo Re Ltd., a Bermuda domiciled special purpose insurer, is seeking to issue a single tranche of notes which will fully-collateralize a reinsurance agreement with Catlin Insurance Company, the Bermuda insurance and reinsurance entity of Catlin Group.

The deal is being marketed with a preliminary size of $175m, a number which could clearly grow if it follows recent cat bond issuance trends and finds investor demand.

The protection will be on an annual aggregate basis using an index constructed of industry losses and will the cat bond covers U.S. named storm risks (so tropical storms, hurricanes and any storm which has been named), U.S. earthquake risks, Canada earthquake risks and European windstorm risks.

Willis Group has launched this Galileo Re cat bond for Catlin, with its Willis Capital Markets & Advisory division the sole structuring agent and bookrunner on the transaction.

In terms of the contribution of risks in this Galileo Re cat bond deal, we’re told that Florida, Texas, Hawaii and New York hold the most exposure for U.S. named storms, California for U.S. earthquake, British Columbia for Canadian quake and the UK, France and Germany for European windstorm.

The deal will provide Catlin with protection for three years from January 2014, so there is no exposure to the current U.S. hurricane season which should help the cat bond be more enthusiastically received by investors at this time of year. The Galileo Re cat bond will cover losses from most of Catlin’s insurance and reinsurance subsidiaries as well as its Lloyd’s syndicates.

Being a cat bond providing annual aggregate cover, this deal will accumulate losses throughout each annual risk period, with reported industry losses being converted to an event index value which will accumulate during the year.

The attachment point is an index value of $480m and the exhaustion point is an index level of $800m, while a $40m event deductible applies.

The reporting agencies for each of the perils are PCS for U.S. named storms and U.S. earthquakes and PERILS for European windstorms. AIR Worldwide is the risk modelling firm for this cat bond.

The $175m of notes being marketed have an annualised attachment probability of 3.6%, an annualised exhaustion probability of 1.31% and an annualised expected loss of 2.22%.

The notes are being offered to investors with coupon guidance of 7.75% to 8.5%.

Update: The Galileo Re catastrophe bond was increased in size while marketing by 43% to $250m in size.

At the same time investor demand helped to drive down the price guidance to below the original range at 7.4% to 7.75% before it closed.

Update 2: Galileo Re grew in size again before final pricing, hitting $300m in size.

At the same time the pricing declined to the bottom of the reduced range to come in at 7.4%.

Over the course of the deal that’s an increase in size of approximately 71% and a reduction in pricing of -9% from the mid-point of the originally marketed range.

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