The outstanding Loma Reinsurance (Bermuda) Ltd. (Series 2013-1) catastrophe bond, that was sponsored by global insurance and reinsurance group Argo, has once again had its maturity date extended further into the future.
It’s yet another sign that losses continue to develop from the 2017 hurricane season, as that was seen to have been the most impactful year to Argo’s aggregate multi-peril catastrophe bond arrangement.
The notes in question are the $65 million of Class C notes from Argo’s Loma Re 2013 cat bond, which the cat bond investor community continues to treat as facing a significant loss of principal, but the size of the loss is still unknown and developing at this time.
The Loma Re 2013-1 Class C notes provided Argo with a $65 million source of fully collateralised reinsurance against losses from tropical cyclones, U.S earthquakes and U.S. severe thunderstorms, using a novel dual trigger, both indemnity and industry loss.
As an aggregate catastrophe bond structure, Argo’s Loma Re 2013 Class C cat bond notes face losses from any, or all three, of the major 2017 hurricanes, as it carries exposure to the U.S. and to Puerto Rico, so has been aggregating losses from each of hurricanes Harvey, Irma and Maria.
Despite the fact these hurricanes are now a number of years in the past, there remains evidence of ongoing loss creep, in particular with hurricane Irma which has driven some further losses into the reinsurance and ILS fund market during the last quarter of 2019.
The $65 million of Class C notes from Argo’s Loma Re cat bond had been marked down for bids of between 45 and 60 cents on the dollar around the beginning of the fourth-quarter of 2019, suggesting an up to 60% loss of the $65 million principal at the time.
The notes were still marked for bids of around 40 on certain broker pricing sheets in January of 2020 as well.
But the loss outlook for this Loma Re cat bond of Argo’s has clearly worsened in 2020, with the notes now marked down for bids at much lower levels, with some sheets marking the tranche for bids of around 20 or as low as 15, suggesting an expectation for a loss of somewhere around 80% or slightly more of the $65 million of principal.
The maturity date for the notes has now been extended until April 8th 2020, to allow for ongoing development of losses under the terms of the cat bond contract.
You can read about more at-risk or paid out transactions in our directory of catastrophe bond defaults and potential payouts.