Allied World Assurance Company (AWAC), a global insurance and reinsurance company and part of the Fairfax Financial group, is set to sponsor its first ever catastrophe bond, with a $150 million targeted issuance of this new 2001 CAT Re Ltd. (Series 2020-1) multi-peril transaction.
Allied World is seeking retrocessional reinsurance style protection from its first catastrophe bond, with the transaction featuring an industry-loss trigger and covering perils in the United States and in Europe.
A new Bermuda based special purpose insurer (SPI) has been established for the cat bond issuance, with 2001 CAT Re Ltd. registered on the island recently.
2001 CAT Re Ltd. will issue a single tranche of Series 2020-1 notes that will be sold to investors and the proceeds used to collateralize the underlying reinsurance arrangements that will provide the coverage to Allied World and a range of its underwriting subsidiaries.
The currently targeted $150 million of Series 2020-1 Class A notes to be issued by 2001 CAT Re will provide Allied World and subsidiaries with a source of multi-year protection against losses from U.S named storm (including Puerto Rico and the US Virgin Islands), U.S. (including Puerto Rico and the US Virgin Islands) and Canada earthquake, U.S. severe thunderstorm and European windstorm risks
The coverage provided will be on an annual aggregate basis across three annual risk periods from January 1st 2021, while the notes can be triggered by qualifying industry loss events that breach predefined index trigger points.
PCS triggers are being used for the U.S. peril loss events, while PERILS AG will report on European windstorm loss events.
The $150 million of Series 2020-1 Class A notes to be issued by 2001 CAT Re Ltd. will have an initial expected loss of 5.4%, we’re told.
These notes will be offered to cat bond investors with coupon guidance in a range from 12% to 13%, we understand.
It’s encouraging to learn of another new catastrophe bond sponsor coming to market in 2020 and seeing value in tapping investor appetite for new issues at this time.
Given Allied World’s strong standing as a global re/insurer, the issuance is likely to be well-received.