AXIS returns to cat bond market for $100m+ Northshore multi-peril deal

AXIS Capital, the Bermuda headquartered global specialty insurance and reinsurance firm, has returned to the catastrophe bond market for the first time this year, with a target for an at least $100 million Northshore Re II Ltd. (Series 2021-1) issuance.

AXIS Capital has sponsored catastrophe bonds a number of times since 2013, most recently sponsoring issuance of a $165 million Northshore Re II transaction around the middle of 2019.

For this new issuance, AXIS Capital is seeking retrocessional protection for the same range of perils as its 2019 deal, as it looks to bring additional capital markets support from insurance-linked securities (ILS) investors within its own reinsurance program, sources said.

Northshore Re II Ltd., AXIS’ Bermuda based special purpose insurer (SPI), will seek to issue at least $100 million of notes to investors, with the proceeds set to be used to collateralize reinsurance agreements between the SPI and the sponsor.

The notes issues will provide AXIS Capital and certain subsidiaries with a three-year source of multi-peril catastrophe reinsurance protection, on a weighted industry loss index and annual aggregate basis.  The transaction is slated to come on-risk from the beginning of 2021 and run to the end of 2023, we understand, hence the Series name.

Coverage will be for the same perils as AXIS’ last Northshore catastrophe bond, so U.S. named storms (inc. Puerto Rico & Virgin Islands), U.S. & Canada earthquake risks and European windstorm risks.

Industry loss indices from PCS and PERILS will be used, with risk modelling provided by AIR Worldwide.

The single, currently $100 million tranche of Series 2021-1 Class A notes to be issued by Northshore Re II Ltd. will have an initial expected loss of 1.9% and are being offered to investors with coupon price guidance in a range from 6% to 6.5%, we’re told.

That compares to a 2019 Northshore Re II cat bond which had an initial expected loss of 2.84% and priced at 7.5%, and a 2018 Northshore cat bond deal that had an initial expected loss of 4.47% and priced at just 7.75%.

The progression in catastrophe bond market pricing is clear in these three issues from across three years, so it is also no surprise that the attachment in terms of expected losses has moved higher up for AXIS’ cat bond issues.

It’s encouraging to see AXIS Capital back in the catastrophe bond market at this time, especially given the increasing role cat bond coverage is now playing in its own reinsurance and retrocession arrangements.

We’ll keep you updated as this Northshore Re II Ltd. (Series 2021-1) catastrophe bond comes to market and you can read about this and every other cat bond deal in the Artemis Deal Directory.