The Blue Halo Re Ltd. (Series 2016-2) catastrophe bond transaction, which is being sponsored by Allianz Risk Transfer the specialist alternative risk transfer and fronting arm of global insurance and reinsurance group Allianz, has more than doubled in size during marketing to $225m.
When this Blue Halo Re 2016-2 catastrophe bond launched Allianz Risk Transfer (ART) was seeking just $100m of coverage from the single tranche of Class C notes. However investor demand for new cat bond notes is extremely high at this time, and ART has jumped on the opportunity to grow the deal, with the latest indications suggesting a 125% increase in size to $225m.
With this second catastrophe bond from the Blue Halo Re issuance vehicle, Allianz ART is seeking an additional layer of fully-collateralized reinsurance and retrocessional protection against industry losses from U.S. named storms (so tropical storms, hurricanes and any storm that has been named by the NHC) across all U.S. storm exposed states, including Florida, the Gulf Coast and east coast, as well as U.S. earthquake risks in all states.
It’s understood that the Blue Halo Re cat bonds are being sponsored by Allianz ART to cover risks that include some assumed and retained through the fronting work the unit undertakes with ILS fund managers such as Nephila Capital.
So the Blue Halo Re 2016-2 Class C notes have grown by 125% to $225m in size, but at the same time the price guidance on the notes has dropped to below the mid-point of where the cat bond launched, a definite reflection of the opportunity sponsors may find in the cat bond market right now.
The Blue Halo Re Series 2016-2 Class C notes will be the least risky sponsored by Allianz ART so far, with an expected loss of 3.99% base and 4.49% sensitivity. The notes were launched with price guidance offered in a range from 8% to 8.75%.
Now, we understand that spread pricing for the Blue Halo Re 2016-2 notes dropped to 8.25% before orders closed for this cat bond deal. At that pricing level the notes will offer investors a multiple of 2.07 times the base expected loss, or 1.83 times the WSST sensitivity case EL.
The cat bond is due to be priced today, we’re told, and is expected to settle later this week.
The fact that Allianz ART looks set to succeed in issuing a catastrophe bond exposed to U.S. hurricanes during the Atlantic storm season is perhaps a sign of the appetite investors have for more cat bond issuance at this time.
Demand from investors and ILS funds is extremely high, as they look to deploy more capacity into the cat bond asset class. In fact many ILS managers say that if the issuance existed they could raise new capital from investors to soak it up.
The opportunity for sponsors of cat bonds, both insurance and reinsurance companies as well as corporates, is clear. Bring a cat bond to market and as long as it is well-structured a successful issuance can be almost guaranteed, and at attractive pricing.
For Allianz Risk Transfer, and also the providers of the risk this cat bond covers, this second Blue Halo Re deal adds another level to the capital markets sourced protection this series of deals offer.
As we said, the Blue Halo Re Ltd. (Series 2016-2) catastrophe bond issuance is expected to complete later this week. We’ll update you should any further information on the transaction emerge.
Read all about this and every other cat bond transaction in the Artemis Deal Directory.