Nationwide Mutual is back looking for another slice of multi-peril reinsurance protection with a new catastrophe bond issuance, a $300 million Caelus Re V Ltd. (Series 2018-1) transaction that marks the insurers return at a time when its in-force cat bond coverage is still facing losses.
Nationwide Mutual has been sponsoring catastrophe bonds for a decade now, with this new Caelus Re V 2018-1 transaction set to be the insurers seventh in the Caelus series of cat bonds.
With its latest issuance, Nationwide Mutual is seeking at least $300 million of multi-year reinsurance protection, we are told, with the coverage fully-collateralized through the sale of four tranches of Series 2018-1 notes that will be issued by Cayman Island’s special purpose vehicle Caelus Re V Ltd.
This Caelus Re V 2018-1 cat bond will supply fully-collateralized multi-peril reinsurance coverage to Nationwide Mutual and subsidiaries including auto insurer Titan Insurance Company, to protect them against certain losses from multiple U.S. perils, including U.S. named storm, earthquake (with fire following), severe thunderstorm, winter storm, wildfire, meteorite impact, volcanic eruption, and other perils.
The reinsurance protection that Nationwide Mutual will benefit from, through the reinsurance agreements with Caelus Re V, will all be provided on an indemnity and annual aggregate basis across a three-year term.
The four tranches of notes will cover different layers of risk within Nationwide Mutual’s reinsurance tower, running from the most risk-remote to the riskiest layer.
Caelus Re V Ltd. will issue a $75 million Series 2018-1 Class A tranche of notes that will have an initial attachment probability of 1.02%, expected loss of 0.63% and will be offered to investors with coupon price guidance of 3.25% to 3.75%, we understand.
An also $75 million Class B tranche of notes will have an initial attachment probability of 2.02%, expected loss of 1.48% and will be offered to investors with coupon price guidance of 4.75% to 5.25%.
A $100 million Class C tranche of notes will have an initial attachment probability of 4.23%, expected loss of 2.94% and will be offered to investors with coupon price guidance of 7.75% to 8.5%.
Finally, a $50 million Class D tranche of notes are the riskiest, with an initial attachment probability of 5.41%, expected loss of 4.8% and will be offered to investors with coupon price guidance of 10.75% to 11.5%.
All four tranches of notes will cover losses to personal, commercial, excess & surplus and specialty lines business underwritten by Nationwide Mutual, we’re told.
With the insurers previous $375 million Caelus Re V Ltd. (Series 2017-1) still facing an as yet to be determined level of losses, due to the aggregate impacts of hurricanes and wildfires in 2017, it is no surprise that Nationwide Mutual is back to replace that loss-hit cat bond coverage with this new transaction.
The Caelus Re V 2018-1 cat bond is due to complete in a weeks time.