Primary, Florida-focused, insurer American Coastal Insurance Company is returning to the catastrophe bond market with a second take-down of the Armor Re program with the launch of an Armor Re Ltd. (Series 2014-1) cat bond issuance.
Sources told Artemis that the deal has launched to the market today and that with the Armor Re 2014-1 catastrophe bond issue American Coastal Insurance is seeking to expand its coverage for Florida named storms, but with an option to extend the protection to other U.S. states at reset if it should choose to.
The Armor Re 2014-1 cat bond has launched offering investors $150m of notes. The sale of the notes will be used to fully-collateralize a reinsurance agreement between Armor Re and the sponsor American Coastal Insurance, providing it with a source of capital markets backed reinsurance protection.
The Armor Re 2014-1 cat bond will provide American Coastal Insurance with a source of reinsurance protection for losses to its commercial residential book of business from named storms (so tropical storms and hurricanes) over three U.S. hurricane seasons, with maturity slated for the end of 2016, Artemis understands.
The coverage will initially be for Florida only but the cat bond can be expanded to include coverage for other hurricane exposed states if the sponsor chooses to (a feature seen in the recent Citrus Re cat bond deals). It’s understood that the regions it can be expanded to are the U.S. states of Georgia, Louisiana, Mississippi, North Carolina, South Carolina and Texas.
The Armor Re 2014-1 cat bond will provide its protection to American Coastal using an indemnity trigger and on a per-occurrence basis. Artemis understands that the Armor Re 2014-1 cat bond notes will attach at $75m of losses to American Coastal Insurance above its other reinsurance coverages. That makes the effective attachment for a first event $984m of losses to the sponsor, but should reinsurance layers be eroded and not replaced beneath that level, then the attachment point could drop-down.
The exhaustion point for the coverage provided by this cat bond cannot be less than $275m, Artemis understands, which would suggest a $200m layer of protection so this cat bond may upsize to cover the whole layer.
The attachment probability for the notes is said to be 0.6%, the exhaustion probability 0.39% and the expected loss 0.46%. The currently $150m series of 2014-1 notes being issued by Armor Re Ltd. are being marketed with initial price guidance of 3.5% to 4%.
Artemis understands that it is Willis Capital Markets & Advisory that is bringing this deal to market as structuring agent and bookrunner. It’s no surprise to see WCMA structuring this deal as it worked on the Armor Re Ltd. (Series 2013-1) deal. WCMA also used the feature allowing the sponsor to expand coverage to include extra U.S. states at reset in the recent Citrus Re deals. AIR Worldwide is providing the risk modelling services.
That’s all we have on the latest second-quarter catastrophe bond to come to market. We will update you on Armor Re Ltd. (Series 2014-1) as it comes to market and it has now been added to the Artemis Deal Directory.