Integrity Re Ltd. (Series 2024-1)

This is the seventh Integrity Re catastrophe bond issuance for sponsoring cedent insurer American Integrity Insurance Company of Florida, Inc.

Bermuda special purpose insurer (SPI) Integrity Re Ltd. is aiming to issue four tranches of Series 2024-1 Class A notes, with the proceeds set to collateralize a new source of capital markets backed peak catastrophe reinsurance coverage for American Integrity.

Hannover Re will front the capital markets for American Integrity, entering into a retrocession agreement with the issuing vehicle and then passing on the reinsurance protection to the ceding insurer, as in all of the Integrity Re cat bond deals.

This has the potential to be a more significant catastrophe bond for American Integrity, with four tranches of notes set to be offered to investors, one of which will provide annual aggregate reinsurance and three to provide per-occurrence reinsurance that would cascade down after events erode lower layers of the insurers’ tower such as its FHCF coverage.

It’s also worth noting that a significant percentage, more than 98%, of the insured values to be covered by this catastrophe bond are in Florida, so this is largely a Florida named storm bond.

With at least $150 million of indemnity based named storm reinsurance sought from this catastrophe bond, with one tranche as yet unsized, across Florida, Georgia and South Carolina, there appears plenty of room to upsize the cat bond should investors have the appetite.

We’re told the notes will cover two risk periods, coming on risk from June 2024, with their coverage running to the end of May 2026 for American Integrity.

A currently $50 million tranche of Class A notes will provide annual aggregate reinsurance, attaching at $120 million and covering a share of losses up to $240 million, with a $10 million event deductible in place and a $60 million per-event cap, we’re told.

The Class A notes have an initial attachment probability of 0.88%, an initial expected loss of 0.22% and are being marketed with spread guidance in a range from 12% to 13%, we understand.

The remaining three tranches all appear to have drop-down or cascading features, so can cascade down the sponsors reinsurance tower as events occur, sources said.

A $50 million Class B tranche will provide per-occurrence protection from a $350 million attachment up to $500 million, giving them an initial attachment probability of 2.58%, an initial expected loss of 2.35% and these notes are being marketed with spread guidance in a range from 14% to 15%.

An unsized Class C tranche would provide per-occurrence protection and attach at $60 million of losses, covering a share to $210 million, giving them an initial attachment probability of 2.64%, an initial expected loss of 2.38% and we’re told these notes are being marketed without spread guidance at this time, with feedback being sought from cat bond investors.

The final $50 million Class D tranche of notes will provide per-occurrence protection from a $200 million attachment up to $350 million, giving them an initial attachment probability of 6.35%, an initial expected loss of 3.56% and these notes are being marketed with spread guidance in a range from 22% to 23%.

Update 1:

American Integrity Insurance Company is aiming to upsize its new catastrophe bond coverage, with now $295 million or more in collateralized named storm reinsurance protection being sought, while at the same time price guidance has fallen.

The aggregate layer of this cat bond deal were originally a $50 million tranche of Class A notes, but we’re now told this is being upsized to its maximum to $120 million, to cover the full layer.

The now $120 million of Class A notes have an initial expected loss of 0.22% and were first marketed with spread guidance in a range from 12% to 13%, but we’re now told this guidance has been reduced to between 11% and 12%.

The Class B tranche of notes are now being positioned as $50 million or more in size and will provide per-occurrence protection, with an initial expected loss of 2.35%. These notes were first offered with spread guidance in a range from 14% to 15%, but we’re told this has now dropped to an updated range of 13.5% to 14%.

The Class C tranche of notes were not sized initially, but we’re now told are targeted to be $50 million or more as well. These also provide per-occurrence protection, with an initial expected loss of 2.38% and having been initially marketed without spread guidance, we’re now told they are offered with pricing of 17%.

The final tranche of Class D notes were originally positioned to be $50 million in size, but are now targeted to secure $75 million or more in per-occurrence reinsurance protection. They have an initial expected loss of 3.56% and were first offered with spread guidance in a range from 22% to 23%, but we now understand this to have been narrowed to a new range of 22.5% to 23%.

Update 2:

The target size for this cat bond issuance rose again, to $305 million, at which level it would have more than doubled since its launch to investors.

The aggregate layer of notes from this cat bond deal were originally a $50 million tranche of Class A notes, which we later learned had been upsized to $120 million, to cover the full layer of the aggregate risk tower.

The $120 million of Class A notes have an initial expected loss of 0.22% and were first marketed with spread guidance in a range from 12% to 13%, which was later reduced to between 11% and 12%, but we’re now told has been lowered again and narrowed to between 10.5% and 11%.

The Class B tranche of notes are still positioned at $50 million in size and will provide per-occurrence protection, with an initial expected loss of 2.35%. These notes were first offered with spread guidance in a range from 14% to 15%, which was then reduced to 13.5% to 14% and we’re now told has been reduced again to 13.25% to 13.5%.

The Class C tranche of notes are now targeted to be $60 million in size, we are told. These also provide per-occurrence protection, with an initial expected loss of 2.38% and continue to be offered with spread pricing of 17%.

The final tranche of Class D notes were originally positioned to be $50 million in size, but are now targeted at the raised $75 million target. They have an initial expected loss of 3.56% and were first offered with spread guidance in a range from 22% to 23%, which was later narrowed to a new range of 22.5% to 23% and we’re now told has been fixed at the 23% upper-end of intiial guidance.

The transaction is now looking set to upsize by more than 100%, while the pricing has moved down further on some layers, aside from the riskiest Class D notes, reflecting cat bond investor’s having stronger appetite for risk from higher layers of reinsurance towers.

Update 3:

American Integrity secured its Integrity Re 2024-1 catastrophe bond issuance at the upsized target of $305 million.

The Class A tranche of notes reached $120 million in size and priced for a spread of 10.5%

The Class B tranche of notes stayed at $50 million in size and priced for a spread of 13.25%.

The Class C notes were finalised at $60 million, priced to pay a spread of 17%.

The Class D notes reached $75 million in size and were priced with a spread of 23%.