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AXIS Capital returns for $150m+ Northshore Re II 2018 cat bond


Bermuda-based specialty insurance and reinsurance firm AXIS Capital Holdings Ltd. has returned to the capital markets with a new Northshore Re II Ltd. (Series 2018-1) catastrophe bond, with which the company is seeking a multi-year source of multi-peril reinsurance and retrocession.

This is the third catastrophe bond from AXIS Capital, all of which have used a Northshore related name. This is the second to use the firms Northshore Re II Ltd. Bermuda domiciled special purpose insurer, that it established last year for a $350 million Northshore Re II 2017-1 transaction.

With Northshore Re II 2018-1, we understand from sources that AXIS Capital is seeking four years of collateralized reinsurance and retrocession protection against losses from U.S. & Puerto Rico named storms, U.S. & Canada earthquakes and European windstorm catastrophe events.

All of the coverage will be on an annual aggregate basis, across four annual risk periods, and the cat bond features industry loss triggers for each covered risk that are weighted on a regional or localised basis from PCS and PERILS.

A single currently $150 million tranche of Series 2018-1 Class A notes will be issued by Northshore Re II Ltd., with the notes sold to investors and the proceeds used to collateralize the underlying reinsurance agreements.

We’re told there is a small franchise deductible for each loss, after which losses will aggregate upwards as index points towards an attachment point for the notes where they would begin to see losses.

The $150 million. of Series 2018-1 Class A notes have an initial attachment probability of 5.09%, an initial expected loss of 4.47% and are being offered to ILS investors and funds with coupon price guidance in a range from 8% to 8.5%.

At the bottom end of that pricing range the deal would have a multiple at market of roughly 1.79 times the expected loss, which is higher than the 2017 Northshore Re II cat bond which completed to offer investors a multiple of 1.67 times EL.

Hence it looks like this could be another cat bond that experiences a reduction in the coupon during marketing and we can likely expect this to settle at the mid-point or perhaps much lower. Although of course the better the multiple the greater the size that could be achieved, so it will come down to AXIS’ desire to lock-in cover from the capital markets with this new deal.

We understand that this Northshore Re II Ltd. (Series 2018-1) catastrophe bond is scheduled for completion in July, hence it will not fall under Q2 issuance this year. Read about this and every other cat bond in the Artemis Deal Directory.

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