Having already increased the target size of its first catastrophe bond by one-third, Allied World Assurance Company (AWAC), a global insurance and reinsurance company and part of the Fairfax Financial group, has now lifted the target a little more, with the latest marketed size of the 2001 CAT Re Ltd. (Series 2020-1) transaction now $210 million, we understand.
At the same time, we’re told that the price guidance for the cat bond notes to be issued has dropped to the bottom-end of guidance.
The 2001 CAT Re Ltd. catastrophe bond will provide Allied World and subsidiaries with a source of multi-year 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 cat bond was initially launched to investors as an offering of a $150 million Series 2020-1 tranche of Class A notes, with an initial expected loss of 5.4% and coupon price guidance in a range from 12% to 13%.
Appetite from investors helped to lift Allied World’s ambitions with this deal, with the re/insurer then looking to increase the amount of reinsurance limit its first cat bond would provide by one-third.
Which meant that 2001 CAT Re Ltd. looked likely to issue $200 million of notes, while the pricing guidance fell and the range was narrowed to between 12% and 12.5%.
Now, the sponsors ambitions have risen again, we understand, with the issuance now targeting to bring $210 million of notes to investors and at the same time the price guidance has been lowered again to the bottom-end at 12%.
All of which will represent a positive result from Allied World’s first visit to the cat bond market, as pricing now looks set to be fixed at the low-end of guidance, providing the latest indicator of the strong demand from investors in the catastrophe bond market right now.
While at the same time the size of the deal may now end up some 40% larger than initially targeted, to provide Allied World with $210 million of capital markets backed reinsurance protection.