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AmFam fails to upsize new Four Lakes Re cat bond, to close at $100m


American Family Mutual Insurance Company, or AmFam as it is abbreviated, has failed to secure an upsize for its new Four Lakes Re Ltd. (Series 2022-1) multi-peril catastrophe bond, with the transaction set to close at the initial $100 million target size.

american-family-insurance-amfamAmFam returned to the catastrophe bond market earlier this month, seeking at least $100 million of collateralized reinsurance from a third Four Lakes Re cat bond issuance.

But, as we explained earlier this week, the company was looking to upsize on this, with a new target being $125 million.

In the end though, we are told AmFam failed to secure the increased size and the deal will now issue just the initially targeted $100 million of notes.

The reason for this is likely down to a mix of market pricing, investor appetites and AmFam’s targeted spend for coverage.

The notes will provide AmFam with reinsurance protection, on an indemnity trigger and per-occurrence basis, against losses from named storms, earthquakes, severe thunderstorms, winter storms and wildfires across the United States.

The now confirmed as $100 million of million tranche of Series 2022-1 Class A notes that Four Lakes Re Ltd. is issuing come with an initial base expected loss of 0.49% and were initially marketed to cat bond investors with price guidance in a range from 6% to 6.5%.

The pricing has moved to the top-end of that range, with the notes confirmed to pay investors a 6.5% coupon, which will represent a significant 13.3 times multiple of the base expected loss.

That’s a particularly high multiple, but this is a lower-risk bond. Cat bonds with lower expected losses tend to come with relatively high multiples-at-market.

There’s also the fact this cat bond covers some perils that can be considered less well-modelled by investors, such as wildfires and severe thunderstorms, which can drive a higher multiple be paid in the current harder reinsurance market environment.

You can read all about this new Four Lakes Re Ltd. (Series 2022-1) catastrophe bond from American Family in the Artemis Deal Directory.

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