Swiss Re Insurance-Linked Fund Management

PCS - Emerging Risks, New Opportunities

Northshore Re II Ltd. (Series 2018-1)

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

  • Issuer: Northshore Re II Ltd. (Series 2018-1)
  • Cedent / sponsor: AXIS Capital Holdings Ltd. subsidiaries
  • Placement / structuring agent/s: GC Securities is structuring agent and bookrunner
  • Risk modelling / calculation agents etc: AIR Worldwide
  • Risks / perils covered: U.S. & Puerto Rico named storms, U.S. & Canada earthquake, European windstorm
  • Size: $200m
  • Trigger type: Industry loss index
  • Ratings: NR
  • Date of issue: Jul 2018

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

This is AXIS Capital’s second catastrophe bond issuance through the Northshore Re II Ltd. Bermuda domiciled special purpose insurer and sees the company looking for at least $150 million of multi-peril reinsurance and retrocession.

With Northshore Re II 2018-1, we understand from sources that AXIS Capital is seeking four years of collateralized reinsurance and retrocession protection against losses from U.S. & Puerto Rico named storms, U.S. & Canada earthquakes and European windstorm catastrophe events.

All of the coverage will be on an annual aggregate basis, across four annual risk periods, and the cat bond features industry loss triggers for each covered risk that are weighted on a regional or localised basis from PCS and PERILS.

A single currently $150 million tranche of Series 2018-1 Class A notes will be issued by Northshore Re II Ltd., with the notes sold to investors and the proceeds used to collateralize the underlying reinsurance agreements.

We’re told there is a small franchise deductible for each loss, after which losses will aggregate upwards as index points towards an attachment point for the notes where they would begin to see losses.

The $150 million. of Series 2018-1 Class A notes have an initial attachment probability of 5.09%, an initial expected loss of 4.47% and are being offered to ILS investors and funds with coupon price guidance in a range from 8% to 8.5%.

At the bottom end of that pricing range the deal would have a multiple at market of roughly 1.79 times the expected loss, which is higher than the 2017 Northshore Re II cat bond which completed to offer investors a multiple of 1.67 times EL.

Update 1:

The target size for this catastrophe bond was lifted to $200 million, while at the same time the price guidance range was lowered to 7.5% to 8%.

Update 2:

The Northshore Re II 2018-1 cat bond has increased to $200 million in size for AXIS, while the pricing has now been fixed at 7.75%, which means the notes will offer investors a multiple of 1.7 times the expected loss.

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