Amlin’s Tramline Re II 2014-1 cat bond grows to $200m, price drops

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The Tramline Re II Ltd. (Series 2014-1) catastrophe bond, sponsored by non-life insurance and reinsurance group Amlin plc, has upsized while marketing to $200m, while at the same time the price guidance has dropped, both likely a reflection of investor demand.

With its latest cat bond, Amlin is seeking to secure a source of fully-collateralized reinsurance protection over a four-year term, to the end of 2018. The single tranche of Tramline Re II 2014-1 cat bond notes will be exposed to U.S. named storms (so tropical storms and hurricanes), U.S. earthquakes and European windstorms, all on a per-occurrence basis.

The Tramline Re II 2014-1 cat bond features an industry loss index trigger, with the U.S. named storm and earthquake coverage using a PCS state weighted index trigger, while the European windstorm coverage using a PERILS country weighted index trigger.

When this cat bond launched, Tramline Re II was proposing the issuance of a single $150m tranche of Series 2014-1 Class A notes. We understand that the deal has been upsized by one-third thanks to investor demand for the cat bond, with the Class A tranche of notes now sized 33% larger to provide Amlin with $200m of protection.

Interestingly, despite this cat bond launching with keen pricing, as we said in our previous article on the deal’s launch, we’re told that the price guidance has been narrowed and lowered to below the bottom of the initial launch range.

The notes were launched with price guidance suggesting a coupon in the range of 10% to 10.75%, but sources told Artemis that this has been both narrowed and dropped to now sit with guidance of 9.75% to 10%. With the expected loss of 5.12%, even at the upper end of the new range the multiple for this cat bond would be less than 2 times the EL.

Perhaps that demonstrates the demand for a higher yielding catastrophe bond, when the market has been flooded by very low-risk, low-yielding deals in recent months. A coupon of 10% can make a big difference to an investors who has been watching his expected returns decline in line with the lower coupon pricing, so perhaps the willingness to accept a lower multiple is a reflection of the appetite for higher yields.

Amlin’s Tramline Re II Ltd. (Series 2014-1) catastrophe bond is expected to complete later this month. We will keep you updated as it progresses to market and you can read all about it and every other cat bond or ILS deal in the Artemis Deal Directory.

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