Ibis Re II Ltd. (Series 2012-1) – Full details:
This is the third cat bond offering from U.S. specialty insurer Assurant. Assurant have established a new Cayman Islands SPV Ibis Re II Ltd. which will seek to issue two tranches of Series 2012-1 notes in this current deal.
Both tranches will provide U.S. hurricane cover to Assurant over a 3 year period on a per-occurrence industry loss basis.
This deal uses the new Verisk Catastrophe Index for trigger purposes, the first cat bond to do so, giving them county-weighted loss data which should make the transaction quite robustly modeled.
The tranches were originally sized at $70m and $30m giving Assurant another $100m of cat bond cover. However the Class A tranche grew to $100m making the total for the transaction $130m by close.
The Class A notes cover is for a pro-rata share of losses in excess of $1.05 billion (the Class A attachment level) up to $1.855 billion (the Class A exhaustion level), on a per-occurrence basis. The Class B notes will cover a pro-rata share losses above $610 million (the Class B attachment level) up to $1.05 billion (the Class B exhaustion level), also on a per-occurrence basis.
The trigger for calculation and measurement of the severity of an event and any associated losses will be the Verisk catastrophe index reports which show insured personal line losses on a county level multiplied by predetermined county payout factors (weighting). This is the first time that the Verisk index has been used for cat bond trigger and calculation purposes, although Verisk are the parent company of PCS so it is not a completely unknown quantity.
The transaction can be extended by up to 24 months for loss development and reporting purposes and the attachment and exhaustion levels can be reset annually using up to date exposure information and the county payout factors to determine new attachment probabilities and expected loss. The initial probability of attachment for the Class A notes will be 2.33% and for the Class B notes 4.95%.
Risk modelling and calculation services are provided by AIR Worldwide for this deal. In their analysis they found that a hurricane the size of the 1992 hurricane Andrew could have triggered the Class A attachment point. One other historical event could have breached the Class A notes attachment point and two other historical hurricane events could have breached the Class B attachment point.
Collateral from the sale of the notes will be deposited in reinsurance trust accounts and invested in highly rated U.S. Treasury money market funds.
Ibis Re II will cover losses in the following areas: Alabama, Arkansas, Connecticut, Delaware, Florida, Georgia, Hawaii, Illinois, Indiana, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Mississippi, Missouri, New Hampshire, New Jersey, New York, North Carolina, Ohio, Oklahoma, Pennsylvania, Rhode Island, South Carolina, Tennessee, Texas, Vermont, Virginia, West Virginia, the District of Columbia, and Puerto Rico.
Update: The Class A tranche of notes has increased to $100m during the marketing phase meaning this deal should complete at $130m of cover for Assurant.
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