Phoenician Re Ltd. (Series 2020-2)

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Phoenician Re Ltd. (Series 2020-2) – 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: $95m
  • Trigger type: Indemnity
  • Ratings: NR
  • Date of issue: Dec 2020

Phoenician Re Ltd. (Series 2020-2) – Full details:

This is the second catastrophe bond to be sponsored by Alphabet Inc., the parent company to tech giant Google. Alphabet has returned to the cat bond market very quickly after securing pricing on its first issuance on-target, with this second smaller Phoenician Re transaction set to add to the coverage secured from the capital markets.

Phoenician Re Ltd., the Bermuda special purpose insurer established for Alphabet’s cat bond program, will now issue another $95 million of Series 2020-2 notes, that will be sold to investors in the cat bond market and the proceeds used to collateralize reinsurance agreements that will ultimately cascade down California earthquake insurance coverage to Alphabet and its Google entities.

As with the first Phoenician Re cat bond transaction for Alphabet, global reinsurance firm Hannover Re will enter into retrocessional agreements with the SPI, in turn providing the reinsurance cover to Alphabet’s Hawaii domiciled captive insurer Imi Assurance, who in turn provides the insurance coverage to Alphabet.

In that way, Alphabet and Google can access the benefits of efficient capital markets backed risk transfer from the insurance-linked securities (ILS) market more directly, with the coverage cascaded down in indemnity form through Hannover Re and the captive to it.

The $95 million of Phoenician Re 2020-2 Class A cat bond notes will provide Alphabet and subsidiaries with an efficient source of California earthquake insurance, across a three-year term and using an indemnity trigger on a per-occurrence basis.

This second Phoenician Re cat bond issuance will sit directly on top of the first, attaching at $1.75 billion of losses (where the 2020-1 notes exhaust) to Alphabet and covering 95% of a layer up to a $1.85 billion detachment.

As a result, the Series 2020-2 Class A notes are more risk remote, with the $95 million of notes having an initial expected loss of 0.247% and being offered to cat bond investors with price guidance in a range from 2.75% to 3%.

The Series 2020-1 notes, which have an expected loss of 0.33%, priced recently with a 3% coupon, which was the mid-point of guidance.

Update 1:

This second Phoenician Re catastrophe bond from Google eventually priced its $95 million of notes at 2.9%, so above the mid-point of guidance.

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