Torrey Pines Re Pte. Ltd. (Series 2021-1)

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Torrey Pines Re Pte. Ltd. (Series 2021-1) – At a glance:

  • Issuer: Torrey Pines Re Pte. Ltd.
  • Cedent / sponsor: Palomar Specialty Insurance Company
  • Placement / structuring agent/s: GC Securities and TigerRisk Capital Markets & Advisory are joint structuring agents and joint bookrunners
  • Risk modelling / calculation agents etc: RMS
  • Risks / perils covered: U.S. earthquake
  • Size: $400m
  • Trigger type: Indemnity
  • Ratings: NR
  • Date of issue: Mar 2021

Torrey Pines Re Pte. Ltd. (Series 2021-1) – Full details:

Palomar Insurance Holdings, the speciality California-headquartered insurer that provides largely catastrophe exposed property products, has returned to the catastrophe bond market for what will be its second transaction with a new earthquake only cat bond, that is being issued out of Singapore.

Palomar has turned to Singapore to domicile a new cat bond issuance vehicle, which will also enable the insurer to benefit from Singapore’s ILS grant scheme which pays some upfront issuance costs.

Special purpose reinsurance vehicle Torrey Pines Re Pte. Ltd. has been registered in Singapore we understand from sources and this structure will look to issue $300 million of catastrophe bond notes that are solely exposed to U.S. earthquake risks.

The $300 million of notes will be issued across two tranches, with different risk and return levels, with the notes set to be sold to investors and the proceeds used to collateralize earthquake reinsurance agreements between Torrey Pines Re Pte. Ltd. and the cedent which is Palomar Specialty Insurance Company.

Both tranches of notes issued will provide Palomar with earthquake reinsurance protection, covering 50 states of the U.S., across a just over three-year term to the end of June 2024 and on an indemnity and per-occurrence trigger basis, we’re told.

A Class A tranche is sized at $150 million and the notes have an initial expected loss of 1.83% and are being offered to investors with spread guidance in a range from 4% to 4.5%.

A Class B tranche of also $150 million in size and its notes have an initial expected loss of 2.97%, so riskier, and are being offered to cat bond investors with coupon spread guidance in a range from 5.25% to 5.75%.

Update 1:

Palomar’s latest catastrophe bond has successfully upsized to $400 million, with both tranches increasing in size to $200 million each and the insurer capitalising on this to lock in more catastrophe reinsurance protection across a multi-year term.

The now $200 million Class A tranche of notes have an initial expected loss of 1.83% and were first offered to investors with spread guidance in a range from 4% to 4.5%. Now, we understand the pricing has been fixed at the low-end of guidance, to offer investors a risk interest spread of 4%.

The Class B tranche, which is now also $200 million in size, features notes with an initial expected loss of 2.97%, so riskier than the Class A layer. These notes were first offered to cat bond investors with coupon spread guidance in a range from 5.25% to 5.75% and we now understand these too have priced at the low-end of spread guidance, at 5.25%.

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