Blue Halo Re cat bond target lifted again to $175m by Allianz ART

The target size for Allianz Risk Transfer’s (ART) new Blue Halo Re Ltd. (Series 2020-1) catastrophe bond transaction has been lifted again, with the deal now aiming to secure up to $175 million of retrocession for the firm’s portfolio and some of the tail risks related to the ILS fronting it undertakes.

Allianz Risk Transfer, the specialist and alternative risk focused unit of the global insurance and reinsurance group Allianz, returned to the catastrophe bond market last month with a new Blue Halo Re 2020-1 deal that at launch was targeting $100 million of retrocessional protection for its portfolio.

The firm is again looking to catastrophe bond investors to support its retrocessional reinsurance needs on an industry loss basis, with the coverage set to protect some of the risks it has assumed through its work with the largest ILS fund manager Nephila Capital, we understand.

Yesterday we reported that the target for the Blue Halo Re 2020-1 cat bond had increased 50% to $150 million.

Now, we understand the target has risen again, this time to make it a $175 million issuance.

Blue Halo Re Ltd. will issue two tranches of Series 2020-1 notes that will be sold to ILS investors, with the resulting capital used to collateralise two retrocessional reinsurance agreements between the issuer and Allianz Risk Transfer (Bermuda)

The notes are exposed to U.S. named storm events across all hurricane exposed states and territories on an industry loss trigger basis.

The Class A tranche will provide the sponsor with annual aggregate retro reinsurance across a three-year term, while a Class B tranche will provide second event per-occurrence protection but featuring an aggregate deductible and only across a one-year term.

The Series 2020-1 Class A tranche began offering $75 million of notes, which was lifted to between $100 million and $125 million as we reported yesterday, but now is seeking to secure $150 million of reinsurance protection for the sponsor.

The Class A tranche will provide annual aggregate protection across a three-year term, with an initial expected loss of 4.41% at the base case. These notes were offered to cat bond investors with price guidance in a range from 12.5% to 13.5%, which then lifted to 13.25% to 13.5%, towards the top-end, but we’re now told has been fixed at 13.25%.

The Series 2020-1 Class B layer tranche is still targeting $25 million of second event per-occurrence cover with an annual aggregate deductible across a single year term. The one year expected loss for these notes is 5.5% at the base case and they were first offered to cat bond investors with coupon price guidance in a range from 14.5% to 16%, and we’re now told this has been fixed at the upper-end at 16%.

This transaction is set to price this week and complete next week.

We’ll update you as the Blue Halo Re Ltd. (Series 2020-1) catastrophe bond comes to market and you can read about every other cat bond transaction in our extensive Artemis Deal Directory.