Allied World is now set to secure its first slice of catastrophe bond backed reinsurance protection at the upsized target of $210 million, while the pricing for the 2001 CAT Re Ltd. (Series 2020-1) transaction has now been fixed at the low-end of initial guidance, we’re told.
Allied World Assurance Company (AWAC), a global insurance and reinsurance company and part of the Fairfax Financial group, began its first visit to the catastrophe bond market earlier this month and the experience looks set to be a positive one for the firm.
The 2001 CAT Re Ltd. catastrophe bond was initially launched to investors as a $150 million offering, as Allied World sought to bring the capital markets into its reinsurance program as a collateralized source of property catastrophe coverage.
The 2001 CAT Re Ltd. cat bond deal will provide Allied World and its subsidiaries with a multi-year source of protection against losses from U.S named storms, U.S. and Canada earthquake, U.S. severe thunderstorm and European windstorm risks, with this multi-year reinsurance coverage provided on an annual aggregate and an industry loss trigger basis.
The deal hit the market as a $150 million Series 2020-1 tranche of Class A notes, that have an initial expected loss of 5.4% and coupon price guidance in a range from 12% to 13%.
Investor appetite appeared to have been strong for this new cat bond deal, resulting in Allied World looking to increase the amount of reinsurance limit its first cat bond would provide by one-third, as the target issuance size lifted to $200 million and the price guidance range was narrowed to between 12% and 12.5%.
Then, as we reported last week, the target size was lifted again to $210 million, while the price guidance was fixed at the bottom-end of guidance, at 12%.
Now, we’re told by sources that Allied World achieved this second upsizing of its first catastrophe bond to $210 million and has secured the coverage at the bottom-end of price guidance, with a 12% coupon.
The outcome represents more strong execution in the catastrophe bond market in 2020, as investor demand has helped a brand new sponsor to achieve a result that was better than initially hoped for (or at least targeted).
Similar execution is expected for catastrophe bonds still to come to market in 2020, of which there are a number that are expected to launch over the next fortnight, we understand.
For Allied World, this first visit to the catastrophe bond market will have been a positive one and insurance-linked securities (ILS) funds and investors have now cemented themselves a place within its reinsurance program that could prove sticky over the coming years.