Swiss Re Insurance-Linked Fund Management

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Gateway Re Ltd. (Series 2023-1)

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

  • Issuer: Gateway Re Ltd.
  • Cedent / sponsor: SURE
  • 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, North and South Carolina, Louisiana, Mississippi, Texas
  • Size: $200m
  • Trigger type: Indemnity
  • Ratings: NR
  • Date of issue: Feb 2023

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

This is the second catastrophe bond to be sponsored by coastal property insurance group, SURE, which was formed by SageSure Capital Holdings Inc. and underwrites its business using the SureChoice Underwriters Reciprocal Exchange (SURE) and Elevate Reciprocal Exchange.

With its second cat bond, SURE is seeking an expanded and multi-year source of US named storm reinsurance protection, on an indemnity trigger and per-occurrence basis.

The coverage is across more states that SURE’s last cat bond deal, with the named storm protection extending across Alabama, North and South Carolina, Louisiana, Mississippi, Texas (NC and SC being new additions for 2023).

Both the SureChoice Underwriters Reciprocal Exchange (SURE) and Elevate Reciprocal Exchange will be covered by this new cat bond, where as from launch the 2022 deal only covered the former.

Gateway Re Ltd., the insurers’ Bermuda domiciled SPI, will seek to issue as many as three tranches of Series 2023-1 notes, that will be sold to catastrophe bond funds and investors and the proceeds used to collateralize reinsurance agreements between the SPI and ceding company SURE.

It appears SURE may be testing market appetite with two of the tranches, so it’s uncertain whether all three will actually be issued, or perhaps just two of them.

A Class A tranche of notes is preliminarily targeting $150 million of named storm reinsurance protection for SURE and these notes are the least risky layer being transferred to the capital markets.

The $150 million of Gateway Re Series 2023-1 Class A notes come with an initial attachment probability of 2.68%, an initial base expected loss of 1.62% and are being marketed to investors with price guidance in a range from 12.25% to 13%, we’re told.

A proposed $50 million Class B tranche of notes are riskier, having an attachment probability of 4.35%, a base expected loss of 3.36% and are offered with price guidance of 19% to 20%.

The Class A and B tranches are multi-year, offering three years of cover.

The final Class C tranche of notes have a one-year term, come with no preliminary size, are structured as zero-coupon notes and have the same attachment and expected loss as the B’s, but come with pricing of 81% to 82% of par (so an 18% to 19% rough coupon equivalent).

So, as the C tranche doesn’t come with a size, it’s possible SURE is testing investor appetite for the one-year zero-coupon layer versus the three year Class B’s, meaning it’s uncertain both get issued.

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