The Atmos Re DAC catastrophe bond transaction, which is sponsored by Italian primary insurer UnipolSai Assicurazioni S.p.A., has now had its sole €45 million tranche of notes priced at what was the top-end of the initial coupon guidance range.
The Atmos Re catastrophe bond originally hit the market back in November 2018 and saw sponsor UnipolSai seeking a €90 million source of collateralised reinsurance across two tranches of notes that would be issued.
The response from ILS investors was not as positive as hoped for and the transaction soon disappeared from sight, while the issuing teams sought a solution that would be palatable for investors.
The solution was to place the higher risk tranche in the reinsurance market, while the lower risk tranche came back to cat bond investors with new price guidance.
The Atmos Re cat bond will provide broad coverage for so-called “atmospheric phenomena,” snow pressure and flood risks.
More details on the cat bond and the coverage it offers can be found in our Deal Directory.
Atmos Re DAC will issue the remaining €45 million tranche of Class A notes and these will be sold to cat bond investors, to cover a layer of risk with an attachment probability of 1.31%, an initial expected loss of 0.45% and attaching at €145 million of losses to UnipolSai’s covered business.
Originally the €45 million Class A tranche notes was offered to investors with price guidance set in a range from 3.5% to 4.5%.
When the deal re-emerged the pricing guidance had risen, with the notes offered to investors with a coupon in a range from 4.25% to 4.75%.
Now the single-tranche cat bond has been priced, with the coupon settling at the top of the initial guidance range, at 4.5%, we understand.
It’s encouraging that a solution was found and that investor feedback was taken into account, resulting in sponsor UnipolSai getting the reinsurance coverage it needed, albeit not solely from the capital markets this time around.
The Atmos Re cat bond was a good test case though and shows that reinsurance for wide-ranging European severe weather risks can be secured in the catastrophe bond market.