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Residential Reinsurance 2008 Ltd.

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Residential Reinsurance 2008 Ltd. – At a glance:

  • Issuer: Residential Reinsurance 2008 Ltd.
  • Cedent / sponsor: USAA
  • Placement / structuring agent/s: Goldman Sachs and Lehman Brothers co-managed the deal
  • Risk modelling / calculation agents etc: ?
  • Risks / perils covered: U.S. hurricane, U.S. earthquake, U.S. severe thunderstorm, U.S. winter storm, U.S. wildfire
  • Size: $350m
  • Trigger type: Indemnity
  • Ratings: S&P: Class 1 - 'BB', Class 2 - 'B', Class 4 - 'BB+'
  • Date of issue: May 2008

Residential Reinsurance 2008 Ltd. – Full details:

The 12th in the long standing Residential Reinsurance series of catastrophe bond securitizations from personal lines insurer USAA.

This 2008 issue allows USAA to diversify its exposure to different weather perils and natural disasters along the coastal states, California and Hawaii.

A spokesperson for USAA, said they managed to obtain more coverage at a lower price this year. The notes were issued in three tranches: The Class 1 at $125m at a reduced price of 675 basis points or 6.75% (it was originally structured as $100m at 700 basis points).

Class 2; $124m at a reduced price of 1150 basis points (originally structured at $100m at 1175 basis points). Class 4 deal ended at $100m at 525 basis points. Class 4 includes additional perils, namely California wildfire, winterstorm, and severe thunderstorms.

The cat bond has an indemnity based trigger, with payout based on actual losses.

This years issue seems to be a very economical way for USAA to receive a large amount of coverage.

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