Market Re Ltd. (Series 2015-2) – Full details:
The $70.509m Market Re 2015-2 cat bond has been brought to market for an unknown Florida based primary insurer sponsor. The first-time sponsor is new to catastrophe bonds. The bond will provide the cedant with a one-year source of fully-collateralized catastrophe reinsurance protection for its Florida book of business.
The reinsurance protection is for Florida named storm risks and runs for a one-year period. The deal features a single tranche of Class A notes, structured on an indemnity trigger basis, with the cat bond providing the cedant with per-occurrence protection.
Interestingly, this is the first Market Re cat bond which has been used by the cedant as a way to reduce its participation in the Florida Hurricane Catastrophe Fund. This is a trend that has been seen in 2015 as the cost of ILS risk capital has dropped below the cost of maintaining a full FHCF cover, allowing cedants to replace some FHCF cover with cat bonds or other ILS products. Market Re 2015-2 has been designed specifically to provide FHCF replacement cover.
As is typical of many private cat bonds Market Re 2015-2 has been structured as a zero coupon bond. The $70.509m of Class A notes represent $75,410,695.19 of limit, which equates to around 6.5% Net rate-on-line against this limit.