Swiss Re Insurance-Linked Fund Management

PCS - Emerging Risks, New Opportunities

Sanders Re Ltd. (Series 2014-2)

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Sanders Re Ltd. (Series 2014-2) – At a glance:

  • Issuer: Sanders Re Ltd. (Series 2014-2)
  • Cedent / sponsor: Allstate
  • Placement / structuring agent/s: Aon Benfield Securities and Swiss Re Capital Markets are joint structuring agents and bookrunners.
  • Risk modelling / calculation agents etc: AIR Worldwide
  • Risks / perils covered: Florida named storms, earthquakes, severe thunderstorms
  • Size: $200m
  • Trigger type: Indemnity
  • Ratings: NR
  • Date of issue: May 2014

Sanders Re Ltd. (Series 2014-2) – Full details:

The Sanders Re 2014-2 cat bond issue is targeting $150m of fully collateralized reinsurance protection for two Florida property market focused Allstate subsidiaries, Castle Key Insurance and Castle Key Indemnity, Artemis understands. This cat bond will provide those two cedent insurers with protection for named storms, earthquakes and severe thunderstorms (so tornadoes as well) only in Florida.

The Sanders Re 2014-2 cat bond will use an indemnity trigger and protection is afforded to the ceding insurers on a per-occurrence basis over a three-year term. This is the first indemnity cat bond from Allstate, with the insurer previously preferring to use industry loss triggers for its group-wide protecting cat bonds.

The $150m of Class A notes have an initial attachment probability of 0.99% and an expected loss of 0.78%. The two ceding insurers have different attachment points, we understand, with Castle Key Insurance set at just over $41m and Castle Key Indemnity at just over $30m. Both are above and after the insurers in-force reinsurance layers. It is understood that the notes allow for a variable reset each year should the ceding insurers want to adjust the protection at all.

The $150m Sanders Re 2014-2 Class A notes are being offered to investors with price guidance of 3.5% to 4%, Artemis understands.

Update 1:

The Class A notes are likely to upsize to between $175m and $200m before close, while at the same time pricing has moved towards the upper end of the launch guidance range, which was 3.5% to 4%, with sources suggesting the notes are now marketed with a coupon of 3.9%.

Update 2:

Artemis understands that the cat bond has grown to the upper end of that range, so effectively an increase in size of 33% to price at an offering of $200m of notes.

The pricing has settled as expected just under the top of the launch guidance range, which was 3.5% to 4%. Sources confirmed that the cat bond has priced with a coupon of 3.9%.

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