Riverfront Re Ltd. (Series 2025-1)

Great American Insurance Group is back in the catastrophe bond market for what will be its fourth cat bond sponsorship, with a targeted issuance of $225 million Riverfront Re 2025-1 notes that are now being offered to the insurance-linked securities (ILS) market’s investor-base.

The companies last cat bond, the Riverfront Re 2021-1 deal, had matured at the end of 2024. So this new Riverfront Re 2025-1 cat bond seems to be an attempt to renew part or all of that important multi-year protection for Great American Insurance, which is part of the American Financial Group of companies.

With its fourth in the series, Great American Insurance is again using the Riverfront Re Ltd. vehicle, a Bermuda domiciled special purpose insurer (SPI).

Riverfront Re Ltd. is offering two tranches of Series 2025-1 notes that will be sold to ILS investors and the proceeds used to collateralize reinsurance agreements between the SPI and sponsor Great American.

The two tranches of notes will both provide Great American Insurance with multi-year and multi-peril collateralized reinsurance protection from the capital markets across just over a three and a half year term, to end of December 2028, so providing four seasons of hurricane coverage as well as protection for other perils, we understand.

The reinsurance protection from the Riverfront Re 2025-1 cat bond notes will cover Great American’s commercial property book, including certain risks from its National Interstate Insurance and Mid-Continent Casualty insurers, on a per-occurrence and indemnity trigger basis from both tranches.

We are told the covered perils are the same as the last tow Riverfront Re cat bond transactions, being U.S., DC and Canada named storms, earthquakes, severe thunderstorms, winter storms, wildfires, meteorite impact, and volcanic eruption.

Riverfront Re is offering a Class A tranche of Series 2025-1 notes that are targeted to be at least $150 million in size and will cover losses from an attachment point of $400m up to exhaustion at $625m, so have room to upsize, we understand.

The Class A notes come with an initial attachment probability of 0.97%, an initial expected loss of 0.56% and are being offered to cat bond investors with price guidance of 4.75% to 5.75%.

A Class B tranche of Series 2025-1 notes is currently sized at $75 million and will cover losses from an attachment point of $275 million, up to an exhaustion point of $400 million, so sit lower down in the reinsurance tower than the Class A notes and are riskier as a result. Again there is room for upsizing.

The riskier Class B notes will have an initial attachment probability of 2.3%, an initial expected loss of 1.54% and are being offered to cat bond investors with price guidance of 7.5% to 8.5%, sources said.

Update 1:

Great American Insurance is now targeting a size of between $300 million and $350 million for this cat bond, with a larger size sought for both the Class A and Class B tranche of 2025 notes.

The Class A tranche of notes are now targeting a size of $200 million to $225 million, and the Class B tranche of notes are now targeting a size of $100 million to $125 million.

We’ve also learned that spread price guidance has been updated for both tranches of notes.

For the Class A tranche, which came with initial price guidance of 4.75% to 5.75%, price spread guidance has been updated to 5.5%, so roughly 5% above the mid-point of initial guidance.

In contrast, for the Class B tranche of series 2025 notes, which came with initial price guidance of 7.5% to 8.5%, price spread guidance has been updated to 7.75%, so roughly 3% below the mid-point of initial price guidance.

Update 2:

Great American Insurance eventually secured $310 million of collateralized reinsurance from this Riverfront Re 2025-1 catastrophe bond, so roughly a 38% upsizing from its initial target.

The Class A notes have been finalised at $200 million in size, with their spread priced at the updated 5.5%.

The Class B notes have been finalised at $110 million in size, with their spread priced at the updated 7.75%.