Swiss Re Insurance-Linked Fund Management

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Phoenician Re Ltd. (Series 2020-1)

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Phoenician Re Ltd. (Series 2020-1) – At a glance:

  • Issuer: Phoenician Re Ltd.
  • Cedent / sponsor: Alphabet Inc.
  • Placement / structuring agent/s: Aon Securities is sole structuring agent and bookrunner
  • Risk modelling / calculation agents etc: AIR Worldwide
  • Risks / perils covered: California earthquake
  • Size: $237.5m
  • Trigger type: Indemnity
  • Ratings: NR
  • Date of issue: Dec 2020

Phoenician Re Ltd. (Series 2020-1) – Full details:

This is the first catastrophe bond to be sponsored by Google’s parent company Alphabet, Inc. as the tech giant looks to the capital markets as a source of California earthquake insurance coverage.

Alphabet, which acts as a holding company for all of the Google tech operations, is looking to secure California earthquake protection from the capital markets, in a deal that will see the firm’s captive insurer ceding risk to a global reinsurance firm, that will in turn enter into a coverage agreement with a special purpose insurer (SPI) Phoenician Re Ltd. which will issue the cat bond notes to investors.

Phoenician Re Ltd. was registered in Bermuda in September and will seek to issue $237.5 million of cat bond notes to investors, with the proceeds set to be used to collateralize retrocessional reinsurance agreements with fronting reinsurer Hannover Re.

Hannover Re will in turn enter into a reinsurance agreement with Imi Assurance Inc., which is Google’s Hawaii domiciled captive insurer.

Alphabet Inc. then gains the insurance direct from its captive, allowing it to benefit from the capital markets appetite for assuming these peak catastrophe risks in a securitized cat bond form.

The single tranche of $237.5 million Series 2020-1 Class A notes to be issued by Phoenician Re Ltd. will provide Alphabet with a source of California earthquake insurance protection, cascaded down via the reinsurance agreements and its captive insurer, over a three-year period.

The notes will have an initial expected loss of 0.333%, we understand, which equates to an attachment point at $1.5 billion of losses and detachment at $1.75 billion.

The notes feature an indemnity trigger and coverage is for all of Alphabet’s subsidiaries and both physical and personal property exposures, it seems.

We’re told that while this is a cat bond focused on California earthquake exposures, it will also cover damage to Alphabet property caused by an earthquake that occurs outside of the state, but causes sufficient losses within the state to trigger the notes.

The $237.5 million of notes on offer are being marketed to catastrophe bond investors and funds with a coupon in a guidance range from 2.75% to 3.25%, we’re told.

Update 1:

Alphabet (Google) secured this $237.5 million catastrophe bond issuance at the targeted mid-point of initial pricing, so the notes will pay investors a coupon of 3%.

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