Swiss Re Insurance-Linked Fund Management

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Gateway Re II Ltd. (Series 2023-1)

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Gateway Re II Ltd. (Series 2023-1) – At a glance:

  • Issuer: Gateway Re II Ltd.
  • Cedent / sponsor: SafePort Insurance Company, SafeChoice Insurance Company
  • Placement / structuring agent/s: Swiss Re Capital Markets is sole structuring agent and bookrunner
  • Risk modelling / calculation agents etc: AIR Worldwide
  • Risks / perils covered: US named storm: Alabama, Louisiana, Mississippi, New York, North Carolina, South Carolina, Texas, Virginia
  • Size: $125m
  • Trigger type: Indemnity
  • Ratings: NR
  • Date of issue: Apr 2023

Gateway Re II Ltd. (Series 2023-1) – Full details:

This is the first catastrophe bond to benefit insurers SafePort Insurance Company and SafeChoice Insurance Company, which are both companies working with coastal property insurance underwriting group SageSure, hence the naming as Gateway Re II Ltd.

SageSure has already secured catastrophe bond protection twice for its SureChoice Underwriters Reciprocal Exchange (SURE) through two Gateway Re Ltd. issuances.

Now, Gateway Re II Ltd. has been registered in Bermuda for issuing catastrophe bonds that will provide capital markets backed reinsurance protection to two other SageSure-linked insurers, SafePort Insurance Company and SafeChoice Insurance Company.

SafePort Insurance underwrites property insurance in Alabama, Florida, Louisiana, Mississippi, New York, North Carolina, South Carolina, and Texas, while SafeChoice Insurance only underwrites property risks in New York.

We’re told by sources that Gateway Re II Ltd. will be used to issue a single tranche of Series 2023-1 Class A notes, with a target for $100 million or greater to be issued.

The notes will be sold to cat bond investors and the proceeds used to collateralize a named storm reinsurance agreement between the structure and the two ceding insurers, SafePort and SafeChoice.

The notes will provide a source of reinsurance against losses from US named storms across the states of Alabama, Louisiana, Mississippi, New York, North Carolina, South Carolina, Texas, and Virginia, we understand.

The coverage will run for a three-year period and be afforded on an indemnity trigger and per-occurrence basis.

The $100 million of Class A notes will have an initial attachment probability of 2.46% and would attach at $130 million of losses, covering a share of a layer of the reinsurance tower up to $280 million, giving room for the deal to upsize as much as 50%, we’re told. We also believe that layer inures to other reinsurance, so the effective attachment point may be higher, in dollar of loss terms.

The notes come with an initial expected loss of 1.44% and are being offered to cat bond funds and investors with price guidance in a range from 9.5% to 10.25%, sources said.

Update 1:

We’ve learned that this issuance is now targeted to provide an upsized $125 million of collateralized reinsurance to the covered insurers, while the price guidance range has been narrowed and lowered towards the bottom of guidance, with a range of 9.5% to 9.75% now offered to investors.

Update 2:

SafePort Insurance Company and SafeChoice Insurance Company eventually secured the $125 million raised target of reinsurance protection with their debut Gateway Re II Ltd. Series 2023-1 catastrophe bond.

The notes were priced with a spread of 9.5%, the low-end of initial guidance and a roughly 4% decline from the mid-point of the range.

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