Specialty insurance and reinsurance player Brit Ltd. is the latest to target an upsizing of its first catastrophe bond issuance, as the firms Sussex Capital UK PCC Limited (Series 2020-1) transaction now has an increased target size of $300 million.
This is Brit’s first full 144a catastrophe bond deal, with the company using its UK domiciled multi-use collateralised reinsurance PCC vehicle, Sussex Capital UK PCC Limited, as the issuance structure to interface with capital market investors.
In November when this cat bond launched to the insurance-linked securities (ILS) investor market, Brit was seeking a $250 million source of multi-year and multi-peril property catastrophe reinsurance protection from the deal.
Now the target has been increased, with Sussex Capital UK now set to issue $300 million of Series 2020-1 Class A notes, which will be sold to investors and the proceeds used to collateralize underlying reinsurance agreements between the UK domiciled ILS structure and Brit Syndicates Limited, Brit’s Lloyd’s underwriting platform and managing agency.
So this first ever Sussex Capital UK catastrophe bond will now provide Brit with $300 million of multi-year reinsurance protection, covering losses from U.S. named storms and U.S. earthquakes across a four year term to the end of 2024.
The coverage is retrocessional in nature and based on a weighted industry loss index trigger on an annual aggregate basis, with a franchise deductible based on index points per event for it to qualify.
The upsized $300 million of Series 2020-1 cat bond notes that are being issued by Sussex Capital UK PCC, which will have an initial expected loss of 3.08%, were first offered to investors with coupon guide pricing of 7.75% to 8.5%.
Now, we’re told the pricing has been lowered to the bottom-end of initial guidance, with the deal likely to close offering investors a coupon of 7.75%.
So the cat bond has upsized, to provide Brit with more reinsurance protection, while the pricing has dropped, making the coverage more cost-effective than had initially been targeted at the mid-point of guidance.
Numerous recent catastrophe bond issues have seen the same happen, an increase in size with a reduction in pricing, demonstrating the value, in terms of cost-effective reinsurance coverage, available to cedents in the catastrophe bond market at this time.
Once completed, this will become the fourth catastrophe bond transaction to ever be issued in the UK.