American Family Mutual Insurance Company, or AmFam as it is abbreviated, is hoping to upsize its latest catastrophe bond issuance, with the new Four Lakes Re Ltd. (Series 2022-1) multi-peril deal now targeting up to $125 million of reinsurance protection for the carrier.
AmFam 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.
With investor appetites for new issues strong, the company is now looking to upsize on this, we’re told, with the new target being $125 million.
Once issued, the now up to $125 million of 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 expected to be $125 million of million tranche of Series 2022-1 Class A notes that Four Lakes Re Ltd. will issue 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%.
We’re now told that the pricing has moved to the top-end of that range, with the notes set to pay investors a 6.5% coupon, which will represent a huge 13.3 times multiple of the base expected loss.
That’s a particularly high multiple, but it is a lower-risk bond, and cat bonds with lower expected losses do tend to come with relatively high multiples.
There’s also the fact this cat bond covers perils that are considered less well-modelled, such as wildfires and severe thunderstorms, which may result in investors requiring a higher multiple be paid in the current harder reinsurance market environment.