American Family Mutual Insurance Company is back in the catastrophe bond market, looking to extend its capital markets supported reinsurance protection through the issuance of a $100 million or larger Four Lakes Re Ltd. (Series 2021-1) multi-peril cat bond issuance.
This is the second Four Lakes Re Ltd. catastrophe bond to be sponsored by American Family Mutual Insurance Company, following on from a $175 million multi-peril issuance in 2020.
But, it’s actually American Family Mutual Insurance Company’s fourth catastrophe bond series though, as the insurer had sponsored the fated Mariah Re issues back in 2010 that were both impacted and suffered total losses due to tornadoes.
With its second Four Lakes Re Ltd. catastrophe bond, American Family (AmFam) is seeing $100 million or more in reinsurance to cover some of its losses from multiple perils across the United States.
The coverage will run across a three-year period to the end of 2024, we understand, and the cat bond notes will feature an indemnity and per-occurrence trigger arrangement.
The sale of the notes will a collateralize reinsurance agreement between Four Lakes Re Ltd. and AmFam, covering it for losses from named storms, earthquakes, severe thunderstorms, winter storms, wildfires, volcanic eruptions and meteorite impacts across the United States.
Four Lakes Re Ltd. will issue a single, currently $100 million tranche of Series 2021-1 Class A notes, that will attach at $1.05 billion of losses to AmFam and exhaust their coverage at $1.45 billion, giving them room to upsize should the sponsor elect to.
The Class A notes will have an initial attachment probability of 2.07%, an initial expected loss of 1.37% and are being offered to cat bond investors with price guidance in a range from 4.5% to 5.25%, we’re told.
These are a less risky set of notes than either of the tranches from AmFam’s 2020 catastrophe bond, but the pricing this year actually looks a little better, implying a higher multiple-at-market if these notes price around the mid-point of guidance.
We can only imagine this is because AmFam’s book has changed, with possibly more subject business underlying this catastrophe bond, hence resulting in the slightly higher priced offering, at least at this stage.
It’s encouraging to see AmFam back for a second catastrophe bond in the space of a year, as the insurer places the capital markets at the heart of its reinsurance arrangements.