Amlin plc, an insurance and reinsurance group involved in non-life underwriting in the Lloyd’s market, Bermuda and Europe, is to sponsor its second catastrophe bond transaction with the launch of Tramline Re II Ltd. (Series 2013-1). The deal sees Amlin looking for a new source of multi-year, fully-collateralized reinsurance for U.S. and Canadian earthquake risks.
Amlin sponsored its first catastrophe bond deal in December 2011 when Tramline Re Ltd. (Series 2011-1) was completed to give it a collateralized source of retro for U.S. hurricane, U.S. earthquake and European windstorm risks. Recently we discussed Amlin’s like of third-party reinsurance capital and its intention to utilise it more, both for its own retro and possibly for its own underwriting.
According to sources this new 2013 catastrophe bond transaction launched late last week. With this Tramline Re II cat bond Amlin is looking to tap capital markets investors to collateralize a reinsurance agreement to give it retrocessional cover. Tramline Re II will provide Amlin’s reinsurer subsidiary Amlin AG with a multi-year source of fully-collateralized retrocessional reinsurance for certain of its U.S. and Canadian earthquake risks on an industry loss basis.
Tramline Re II Ltd. is a newly registered Bermuda domiciled special purpose insurer set up for the purpose of issuing series of catastrophe bond notes. With the launch of Tramline Re II a single tranche of $75m Class A notes are being marketed to investors, although we understand that there is a good chance that this could increase before the deal is closed if market conditions are attractive. The notes will provide Amlin with protection against earthquakes in the U.S. and across all of Canada.
The catastrophe bond will provide Amlin with reinsurance protection on a per-occurrence basis using an industry loss trigger. We understand that a state weighted PCS index will be used for U.S. earthquake risks, while for the Canadian earthquake risks the PCS index will be weighted by province.
The deal will provide cover for a four-year term up to July 2017 we understand. The attachment point for the notes is said to be at an index level of $325m and the exhaustion at $425m, with an attachment probability of 1.49%, an exhaustion probability of 1% and an expected loss of 1.21%. We’re told that the notes are being marketed with a coupon price guide range of 3.25% to 3.75%.
We understand that Aon Benfield Securities is responsible for both structuring and marketing this transaction for Amlin. The risk modeller for the cat bond is AIR Worldwide.
We suspect that this cat bond will be well received, coming just at the start of the U.S. hurricane season when issuance can be much quieter. Inflows of new investor capital into the ILS and cat bond sector have shown no signs of slowing down however and investors will be keen to support any new catastrophe bond issuances that come along. This could make it a very good time for Amlin to bring this deal to market.
That’s all of the details we have for now on this transaction. As Tramline Re II Ltd. (Series 2013-1) comes to market we hope to be able to bring you more information on the transaction. The catastrophe bond transaction has been added to our Deal Directory and we will update that entry as more details become available.