Gryphon Mutual Insurance Company, a real estate captive insurer which we understand to be owned by investment giant Blackstone, is entering the catastrophe bond market with the help of global reinsurance firm Hannover Re, with the company seeking $50 million of parametric California earthquake protection from a Wrigley Re Ltd. (Series 2021-1) transaction.
We understand that Hannover Re is acting as a ceding reinsurance company for this Wrigley Re catastrophe bond, interfacing with the capital markets investors on behalf of Gryphon Mutual Insurance, which will be the ceding insurer to benefit from the reinsurance protection the notes provide.
Blackstone established Gryphon Mutual Insurance as a real estate property focused captive insurer in 2020, we understand.
The private equity investment giant said at the time, that launching Gryphon as a captive would give it more control over its property insurance program and help to reduce costs for the company.
Given the size of its investment operations and also its own employee-base, the investment manager clearly believes that a slice of responsive parametric quake coverage is appropriate for its property insurance tower in California, with the capital markets seen as an efficient way to secure that coverage.
A new Bermuda based special purpose insurer named Wrigley Re Ltd. has been established for this cat bond issuance.
We’re told that Wrigley Re Ltd. will look to issue a single $50 million tranche of Series 2021-1 Class A notes, with the notes to be sold to investors and the proceeds to be used to collateralize retrocessional agreements between Hannover Re and Wrigley Re.
We assume that Hannover Re will then enter into a reinsurance agreement with Gryphon Mutual to cascade the coverage down, with Blackstone’s captive property insurance program the ultimate beneficiary.
The notes will provide a source of fully-collateralized reinsurance protection against losses from California earthquakes on a parametric trigger and per-occurrence basis, we understand.
The coverage will run for roughly a three-year term to the end of June 2024 and is focused on specific calculation locations for the earthquake parametric trigger, it appears.
The $50 million of notes to be issued by Wrigley Re Ltd. will have an initial expected loss of 0.99% and are being offered to cat bond investors with price guidance in a range from 2.75% to 3.25%, we’re told.
It’s encouraging to see a parametric catastrophe bond being issued, as these remain relatively rare in the market, but even more so to see another captive ceding risk for its owners, Blackstone, to the capital markets through a catastrophe bond.