Swiss Re Insurance-Linked Fund Management

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Astro Re cat bond shrinks to $40m, at higher-end of pricing


According to sources, the Astro Re Pte. Ltd. (Series 2021-1) catastrophe bond, that is being sponsored by U.S. primary insurance group Frontline Insurance on behalf of itself and subsidiary First Protective, is set to shrink to $40 million in size, with pricing at the high-end of guidance.

frontline-insurance-logoAs we explained last week, issuance of the Astro Re catastrophe bond had been delayed a little, with what was at first slated to be a June issuance set to fall into July.

Partly, we were told that this was due to investor questions, given that previous cat bonds from the issuer that still have losses developing against them.

But we’re also told that traditional, or collateralised, reinsurance has proven competitive as well and that the layer of risk initially targeted for the Astro Re catastrophe bond is now expected to be split with reinsurance.

When this transaction was first marketed to cat bond investors about a week into June, sponsor Frontline Insurance was seeking a $100 million or greater source of named storm reinsurance protection for itself and subsidiary First Protective.

After the prolonged marketing of the transaction, we’re told that the issuance has now been updated as just a $40 million offering of notes.

So now, Singapore based special purpose reinsurance vehicle (SPRV) Astro Re Pte. Ltd. will issue a single Series 2021-1 Class A tranche of notes, currently sized at $40 million, with the notes set to be sold to investors and the proceeds used to collateralize a reinsurance agreement to cover Frontline and First Protective.

The reinsurance cover will be against losses from named storms across the states of Florida, Alabama, Georgia, North Carolina and South Carolina, on an indemnity trigger and per-occurrence basis, across a four-year term to July 2025.

The now $40 million of notes to be issued by Astro Re Pte. have an initial expected loss of 2.9%.

At the launch of this transaction the notes were marketed to cat bond investors with price guidance in a range from 7.25% to 8%.

But we’re now told that the reduced $40 million offering is now being marketed with a coupon of 8%, so the upper-end of the range and reflecting a relatively high multiple to the expected loss.

Update: The notes have now been priced with this 8% coupon.

So it does seem investors are demanding a little higher coupon from Frontline.

But the fact the catastrophe bond market is sticking with the sponsor and the sponsor sticking with cat bonds and including them in its program is encouraging for future potential issues from the insurer.

You can read all about this new Astro Re Pte. Ltd. (Series 2021-1) catastrophe bond from Frontline and every other cat bond ever issued in our Artemis Deal Directory.

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