Swiss Re Insurance-Linked Fund Management

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Integrity Re Ltd. (Series 2018-1)

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Integrity Re Ltd. (Series 2018-1) – At a glance:

  • Issuer: Integrity Re Ltd. (Series 2018-1)
  • Cedent / sponsor: American Integrity Insurance Company of Florida, Inc. via Hannover Rück SE
  • Placement / structuring agent/s: GC Securities is sole structuring agent and bookrunner
  • Risk modelling / calculation agents etc: AIR Worldwide
  • Risks / perils covered: Florida named storms & severe thunderstorms
  • Size: $79m
  • Trigger type: Indemnity
  • Ratings: NR
  • Date of issue: Apr 2018

Integrity Re Ltd. (Series 2018-1) – Full details:

American Integrity has returned to the catastrophe bond market for its second issuance, with the assistance of Hannover Re as its Hannover Rück SE entity will act as the ceding reinsurer, fronting the investor base for American Integrity which is the reinsured and so beneficiary of the fully-collateralized reinsurance protection that the Integrity Re 2018-1 cat bond will provide.

The Integrity Re Ltd. special purpose insurer (SPI) will seek to issue two tranches of Series 2018-1 notes in this currently $85 million deal, with both being sold to cat bond investors and the proceeds used to collateralize the retrocession agreements between itself and Hannover Re, while Hannover Re enters into reinsurance agreements with American Integrity.

Both tranches of notes will provide American Integrity with a source of collateralized reinsurance against certain losses from Florida named storms and severe thunderstorms across a four-year term. Both tranches will feature an indemnity trigger, with coverage on a per-occurrence and cascading basis.

The currently $75 million tranche of Integrity Re Series 2018-1 Class A notes will be exposed to Florida named storm protection only. These notes will sit at the top of American Integrity’s reinsurance tower and given the cascading nature will drop-down as events erode stated reinsurance, FHCF and other cat bond layers beneath.

The Integrity Re Series 2018-1 Class A notes have an initial attachment probability of 1.34%, an initial expected loss of 1.27% and are to be offered to cat bond investors with guide pricing in a range from 3.75% to 4.25%.

The currently $10 million Integrity Re Series 2018-1 Class B tranche of notes will be exposed to both Florida named storms and Florida severe thunderstorm risks. This tranche is much riskier, sitting alongside the FHCF coverage within American Interity’s reinsurance tower.

The Integrity Re Series 2018-1 Class B notes have an initial attachment probability of 9.86% and an initial expected loss of 5.74%. Our sources told us that the guide pricing for this tranche of notes is only available through enquiry to the bookrunners, so not available to us at this time. Clearly the price will be higher but it’s possible that American Integrity does not want to advertise it to potential reinsurance counterparties until its program for the 2018 renewal is arranged.

Update 1:

The Integrity Re Series 2018-1 Class A notes remain at $75 million in size and price guidance dropped to the bottom end at 3.75%.

The Integrity Re Series 2018-1 Class B tranche of notes shrank to just $4 million in size, while the price guidance we now understand to be 9.5% for this riskier layer of notes.

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