Hypatia Ltd. (Series 2020-1)

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Hypatia Ltd. (Series 2020-1) – At a glance:

  • Issuer: Hypatia Ltd.
  • Cedent / sponsor: Convex Re
  • Placement / structuring agent/s: GC Securities is sole structuring agent and bookrunner
  • Risk modelling / calculation agents etc: AIR Worldwide
  • Risks / perils covered: U.S. named storm, U.S. & Canada earthquake
  • Size: $150m
  • Trigger type: Industry loss index
  • Ratings: NR
  • Date of issue: Jul 2020

Hypatia Ltd. (Series 2020-1) – Full details:

This is the first catastrophe bond to be sponsored by Convex Group, the specialty insurance and reinsurance company founded by Stephen Catlin.

With its first cat bond transaction, Convex is seeking multi-year retrocessional reinsurance protection against losses from named storms and earthquakes.

We understand from sources that the industry loss triggered Hypatia cat bond deal is being transacted in swap form rather than reinsurance, while the special purpose issuer in Bermuda was originally going to be named Hypatia Re Ltd., but will be changed to Hypatia Ltd.

We’re told that Hypatia Ltd. will look to issue two tranches of Series 2020-1 cat bond notes, both of which will be exposed to losses from U.S. named storms, including Puerto Rico, D.C and the US Virgin Islands, as well as both U.S. and Canadian earthquake risks.

Coverage will be on an annual aggregate basis, using a weighted PCS industry loss index trigger, and across an almost three year term.

The cedent will be Convex Re, the Convex group reinsurance entity, but the coverage is also across entities such as Convex’s UK insurer as well, we understand.

A currently $100 million Class A tranche of notes to be issued by Hypatia Ltd. will provide Convex with aggregate industry loss based retro reinsurance attaching at $120 million of losses, after a $30 million franchise deductible, with this tranche of notes having an initial expected loss of 1.71% and being marketed to investors with coupon guidance of 7.25% to 7.75%, we’re told.

A $50 million Class B tranche will provide identical coverage, but attaching lower down at $80 million, again after a $30 million franchise deductible, giving the notes an initial expected loss of 3.06% and coupon price guidance of 10% to 10.5%.

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