Riverfront Re Ltd. (Series 2021-1)

Great American Insurance Group has returned to insurance-linked securities (ILS) for what will be its third and likely largest catastrophe bond issuance, with a $200 million Riverfront Re 2021-1 transaction now being offered to the ILS market’s investor-base.

Riverfront Re Ltd., a Bermuda domiciled special purpose insurer (SPI), will seek to issue two tranches of notes that will be sold to ILS investors and the proceeds used to collateralize two reinsurance agreements between the SPI and sponsor Great American.

The two tranches of notes will both provide Great American Insurance with multi-year collateralized reinsurance protection from the capital markets across a roughly three and a half year term, to end of December 2024, we understand.

The reinsurance protection provided will be on a per-occurrence basis from both tranches issued, while the covered perils are the same as the 2017 transaction, being U.S. and Canada named storms, earthquakes, severe thunderstorms, winter storms, wildfires, meteorite impact, and volcanic eruption.

Riverfront Re will issue a tranche of Class A notes that are targeted to be at least $150 million in size and will cover losses from an attachment point of $200m up to exhaustion at $450m, giving room for some upsizing, we’re told.

The Class A notes will have an initial expected loss of 0.92% and are being offered to cat bond investors with price guidance of 3.75% to 4.5%.

A Class B tranche is currently sized at $50 million and will cover losses from an attachment point of $125m, up to an exhaustion point of $200m, so sit beneath the A notes and are riskier as a result. Again there is some room for upsizing.

The riskier Class B notes will have an initial expected loss of 2.65% and are being offered to cat bond investors with price guidance of 6.5% to 7.5%, we understand.

The catastrophe bonds will provide Great American Insurance with reinsurance across a subset of its commercial property insurance book, sources said and also cover certain losses from affiliates of the insurer, including National Interstate Insurance and Mid-Continent Casualty.

Update 1:

Great American Insurance Group’s target for its third catastrophe bond increased, with the insurer now aiming to secure between$285 million and $305 million of reinsurance protection from this issuance.

A Class A notes tranche of notes had originally targeted $150 million of cover, for losses from an attachment point of $200m up to exhaustion at $450m. We’re now told that this tranche is likely to settle at between $215 million and $235 million.

These now larger tranche of Class A notes will have an initial expected loss of 0.92% and were first offered to cat bond investors with price guidance of 3.75% to 4.5%. Now, the price guidance has been fixed at 4.25%, we understand, which is interesting in being actually slightly above the initial mid-point, when every other cat bond of late has priced down, some significantly.

The Class B tranche of notes began as a $50 million layer, but we’re now told this has been increased to $70 million in size, so will cover 100% of the layer from their attachment point of $125m, up to an exhaustion point of $200m.

The riskier Class B notes, with an initial expected loss of 2.65%, were first offered to cat bond investors with price guidance of 6.5% to 7.5%, but we’re told this has now been fixed at the low-end of 6.5%.

Update 2:

Great American Insurance Group secured the upsized $305 million of reinsurance protection from this latest Riverfront Re catastrophe bond issuance, with pricing of both tranches settling at the revised 4.25% for the $235 million Class A tranche and 6.5% for the $70 million Class B tranche of notes.