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American Strategic owner’s Bonanza Re 2020-2 cat bond fixed at $295m


The new Bonanza Re Ltd. (Series 2020-2) catastrophe bond issuance eventually grew by 195%, with the now priced transaction set to provide $295 million of reinsurance protection to ARX Holding, the Progressive-owned parent of American Strategic Insurance Group.

american-strategic-progressive-logoWhen the cat bond was launched to the market, it was seeking at least $100 million of protection for the sponsor, from a three-tranche issue designed to provide multi-peril reinsurance protection to the sponsor which owns the American Strategic group of insurance companies and also Progressive Property Insurance.

Marketing went well and the target size grew to up to $300 million, even though the highest risk aggregate layer of Class C notes were dropped from the issuance.

In the end, the Bonanza Re cat bond issuance nearly tripled in size, pricing to offer ARX and its insurer subsidiaries $295 million of catastrophe reinsurance protection.

Bonanza Re Ltd., a Bermuda domiciled special purpose insurer (SPI), will now issue two tranches of Series 2020-2 notes amounting to $295 million, for this cat bond issuance.

The proceeds from the sale of the notes will collateralize underlying reinsurance agreements between Bonanza Re Ltd. and the ceding insurer, so the insurance entities owned by ARX Holding.

The Class A tranche of notes will provide U.S. named storm reinsurance protection on a per-occurrence and indemnity trigger basis, covering four wind seasons, coming on-risk from June 1st 2021 and running until the end of December 2024.

This tranche doubled in size from $100 million to $200 million, providing per-occurrence and U.S. wind only coverage. The notes have an initial expected loss of 1.04% and were first offered to investors with a coupon guidance range of 4.5% to 5%, and pricing has now been fixed at the mid-point at 4.75%, we understand from our sources.

The Class B tranche of notes, which will provide annual aggregate reinsurance protection on an indemnity basis, covering losses from U.S. named storms, severe thunderstorms, winter storms, wildfires, earthquakes across just a one year term, running through calendar year 2021, eventually priced at $95 million in size, we’re told.

This tranche were first offered to investors as zero-coupon, discount notes with an initial expected loss of 0.36% and price guidance in a range from 90% to 88% of par, which equates to a roughly 10% to 12% coupon and the pricing has now been fixed at the high-end of guidance, at 88% of par, so a roughly 12% coupon equivalent.

As the sponsors second catastrophe bond of the year, American Strategic’s parent has now secured $495 million of reinsurance protection from the capital markets in 2020.

You can read all about the Bonanza Re Ltd. (Series 2020-2) transaction and every other cat bond deal in our extensive Deal Directory.

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