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Aon’s Randolph Re issues $25m wildfire cat bond, likely for Mercury


Aon’s private catastrophe bond issuance and placement platform Randolph Re has completed a $25 million Randolph Re (Series 2022-1) private cat bond deal, the third from the issuer and we suspect again for California headquartered property casualty insurer Mercury Insurance.

Camp wildfire California damage (photo via the BBC website)A year ago, we reported that Mercury Insurance had secured $50.7 million of California wildfire reinsurance protection through a Randolph Re (Series 2021-1) private catastrophe bond issued using Aon’s platform.

That followed a $50.25 million Randolph Re (Series 2020-1) private catastrophe bond transaction a year earlier, which we later learned covered California wildfire risks as well.

Now, we’ve learned of a 2022 issuance, which appears to be a renewal transaction, given similarities in maturity and issuance dates across the three deals.

We’ve also learned that this new Randolph Re 2022-1 private cat bond definitely covers wildfire risks again, which we’re told are California is terms of their largest exposure concentration.

Mercury Insurance is a P&C specialist underwriter that insures a large portfolio of property risk in wildfire exposed parts of California and has been utilising the ILS market for reinsurance for some years now, culminating in the use of Aon’s Randolph Re issuance platform to secure its protection through private cat bonds.

We suspect this new arrangement and the first Randolph Re were both for Mercury Insurance as well, with that making this the second renewal and third private wildfire cat bond in the series for the insurer.

Aon launched its Randolph Re private cat bond platform in late 2019, becoming the brokers’ dedicated platform for issuance of private ILS transactions.

Randolph Re transactions are supposed to be sized at $25 million and above, meaning this latest is just qualifies, and deals can be executed in a streamlined manner and syndicated to capital market investors.

Private placement cat bonds placed using Randolph Re are issued using a cell of Aon’s special purpose vehicle White Rock Insurance (SAC) Bermuda Ltd. and the brokers’ insurance management unit Aon Insurance Managers services the transactions.

This third Randolph Re issuance saw Aon’s White Rock Insurance (SAC) Ltd., acting on behalf of its segregated account Randolph Re 2022-1 and under the Randolph Re Program, has issued $25 million of Series 2022-1 notes.

The Series 2022-1 insurance-linked notes issued by Randolph Re are due  as of July 6th 2023, which ties in with the previous deals, as all three have had a July 6th maturity date.

As a result, we anticipate this latest Randolph Re private cat bond represents a one-year fully collateralised reinsurance agreement that has been securitised for the cedent, which is again likely to be Mercury Insurance.

We do know that the notes will provide the cedent with wildfire reinsurance protection focused on California.

It’s likely they also cover fire losses following an earthquake as well, as the 2021 Randolph Re private cat bond did.

Also like last year, we’re told the $25 million of Randolph Re Series 2022-1 private cat bond notes will provide their wildfire reinsurance protection on an indemnity trigger and per-occurrence basis.

They are likely to be zero-coupon notes as well, although we do not know their pricing, but we are told they are likely to have been issued discounted at somewhere around 93 cents on the dollar.

The $25 million of Series 2022-1 notes issued by Randolph Re have been admitted to the Bermuda Stock Exchange (BSX) for listing.

Mercury Insurance was one of those that saw its portfolio particularly hard hit by wildfires of recent years, we understand.

The capital markets may have offered an effective and alternative source of reinsurance, to complement its traditional program, resulting in this series of Randolph Re private cat bonds.

You can read all about this Randolph Re (Series 2022-1) private catastrophe bond transaction and every other cat bond in the Artemis Deal Directory.

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