Swiss Re Insurance-Linked Fund Management

PCS - Emerging Risks, New Opportunities

Northshore Re II Ltd. (Series 2017-1)

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Northshore Re II Ltd. (Series 2017-1) – At a glance:

  • Issuer: Northshore Re II Ltd. (Series 2017-1)
  • Cedent / sponsor: AXIS Capital Holdings Ltd. subsidiaries
  • Placement / structuring agent/s: Aon Securities is structuring agent and bookrunner
  • Risk modelling / calculation agents etc: AIR Worldwide
  • Risks / perils covered: U.S. named storms, U.S. earthquake, Canada earthquake
  • Size: $350m
  • Trigger type: Industry loss index
  • Ratings: NR
  • Date of issue: Jun 2017

Northshore Re II Ltd. (Series 2017-1) – Full details:

Northshore Re II Ltd. is a newly registered Bermuda domiciled special purpose insurer established to issue catastrophe bonds to provide AXIS Capital Holdings Ltd. and its insurance and reinsurance subsiaries with retrocessional reinsurance protection.

The notes issued by Northshore Re II will be sold to ILS and cat bond investors to collateralized a reinsurance agreement between the issuer and sponsor, in order to provide AXIS and its subsidiaries, including its Lloyd’s syndicate, insurers and reinsurers, with fully-collateralized reinsurance and retrocession.

The single tranche of $250 million Series 2017-1 Class A notes will protect AXIS and its subsidiaries against losses caused by U.S. named storms, U.S. earthquakes and Canadian earthquakes.

The reinsurance protection will be on a per-occurrence basis, across a three-year term and the Northshore Re II 2017 cat bond will feature a PCS industry loss index trigger, which will be weighted by state and province we understand.

The $250 million of Northshore Re II 2017-1 cat bond notes will have an initial attachment probability of 6.35%, an initial expected loss of 4.33% and is being offered to ILS investors with coupon price guidance in a range from 7.5% to 8.5%.

This pricing is keen, with the multiple just 1.84 times the expected loss at the mid-point of that range, so it will be interesting to see where this transaction settles.

Update 1:

AXIS is set to take advantage of the very attractive conditions in the cat bond market, with sources telling us that this deal will be upsized by 40% to $350 million.

When the transaction was launched, the notes were being marketed with coupon price guidance in a wide range from 7.5% to 8.5%, but this has now been tightened down to the lower end of that range at 7.5% to 8%, we understand.

Update 2:

Price guidance was subsequently lowered further, to below the launch range, at 7% to 7.5%.

Update 3:

Final pricing was set at 7.25%, so the middle of the reduced range, resulting in a multiple of roughly 1.67 times the initial expected loss.

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