Google’s holding company parent Alphabet, Inc. is hoping to upsize its third catastrophe bond transaction to provide it with as much as $285 million of California earthquake risk protection from the Phoenician Re Ltd. (Series 2021-1) issuance.
At the same time, we’re told that the pricing for the $250 million to $285 million issuance of Series 2021-1 notes from Phoenician Re Ltd. has now been fixed at the mid-point of initial guidance.
Google’s parent company Alphabet returned to the catastrophe bond market around mid-November, as the tech giant looks to add another $250 million or more of California earthquake risk protection to its insurance arrangements with the help of insurance-linked securities (ILS) investors.
It’s the third Phoenician Re series of notes to be issued and with this latest series, Google is looking to build out the capital market and ILS fund backed coverage the tech company receives from its catastrophe bonds.
Phoenician Re Ltd., Google’s Bermuda-based special purpose insurer, was targeting issuance of an at least $250 million Series 2021-1 tranche of notes, which would be sold to collateralize reinsurance agreements that will ultimately cascade down to provide California earthquake insurance coverage to Alphabet and its Google entities.
Global reinsurance company Hannover Re is again fronting and transforming the risk for the tech giant and will enter into retrocessional agreements with the SPI Phoenician Re, then into reinsurance agreements with Alphabet’s Hawaii domiciled captive insurer Imi Assurance, which in turn will provide the insurance protection to Alphabet.
The new Phoenician Re Ltd. cat bond will provide Alphabet and its Google operations with a three year source of California earthquake insurance protection, on a per-occurrence basis and using an indemnity trigger.
With the single Class A tranche of notes set to cover losses from an attachment point of $1.5 billion for Alphabet and exhaust at $1.9 billion, which left room for the deal to upsize if necessary.
We’re now told the target size for the issuance has been increased, but only slightly, with Google now hoping to secure as much as $285 million of earthquake coverage from this cat bond.
The now up to $285 million of Series 2021-1 Class A notes that Phoenician Re is offering to investors have an initial expected loss of 0.51% and were first offered to cat bond investors with price guidance in a range from 2.25% to 2.75%.
We’re now told that this has been fixed at the mid-point, of 2.5%, so offering a relatively high multiple-at-market of just under 5 times the expected loss.
It’s a much lower multiple than the previous two Google catastrophe bonds, but still commensurate with how other California quake issues have priced from the likes of the CEA.