Integrity Re II Pte. Ltd. (Series 2020-1)

American Integrity has returned to the catastrophe bond market for what will be its fourth visit, as the company seeks to expand its capital markets backed sources of reinsurance against Florida named storms and hurricanes with a $125 million Integrity Re II transaction.

The insurer will be benefiting from Singapore’s ILS grant program to assist in reducing the expense of issuance, we assume, with the issuing vehicle being a Singapore domiciled Special Purpose Reinsurance Vehicle (SPRV) named Integrity Re II Pte. Ltd., we understand.

Integrity Re II Pte. Ltd. will issue a single Series 2020-1 tranche of Class A notes that will be sold to investors to collateralise a retrocession agreement between it and Hannover Re, with the reinsurer then entering into a reinsurance agreement with American Integrity to provide the protection.

The issuance is targeting at least $125 million of reinsurance coverage for American Integrity across a three-year term.

The notes will provide the insurer with reinsurance protection against Florida named storms, so hurricanes and tropical storm events, with coverage on an indemnity trigger and per-occurrence basis, we’re told.

The $125 million of Class A notes to be issued by Integrity Re II Pte. Ltd. will have an initial expected loss of 1.98% and are being offered to cat bond investors with coupon price guidance in a range from 6.75% to 7.25%, sources explained.

Update 1:

We understand from sources that investor demand for the deal looks set to help it upsize and that the Integrity Re II 2020 catastrophe bond issuance is now targeting from $135 million to as much as $150 million of protection for the insurer.

We’re old that pricing has risen to the upper-end of the 6.75% to 7.25% guidance range, with the upsized tranche now being offered with fixed pricing of 7.25%.

Update 2:

The Integrity Re II Pte. Ltd. catastrophe bond finally settled at $150 million in size, so the upper-end of the targets for the bond, but with pricing also settling at the upper-end to pay investors a coupon of 7.25%.

Update – April 2023:

The Integrity Re II Pte. Ltd. catastrophe bond notes have been considered at-risk of losses from September 2020’s hurricane Ian.

At first the notes were marked down to imply an almost complete loss, but gradual recovery occurred as was seen in many exposed cat bond positions.

We’re now told that, to allow for continued loss development of American Integrity’s ultimate, the Integrity Re II Series 2020 Class A notes have had their maturity date extended out by five years, to April 2028.

The notes are currently marked down for bids of around 50 to 60 cents on the dollar, suggesting the market expects up to a 50% loss of principal is possible.

Update – January 2024:

American Integrity updated its estimate for losses from hurricane Ian in December 2023.

As a result, these Integrity Re II 2020-1 catastrophe bond notes have been marked down suggesting a total loss of the $150m of principal is anticipated, with them widely marked for bids as low as 1 cent on the dollar on secondary pricing sheets at this time.