Floridian primary insurer Avatar Property and Casualty Insurance Company is coming to market with its first catastrophe bond issue, a $100 million Casablanca Re Ltd. (Series 2017-1) transaction, as it seeks a capital market backed source of Florida named storm reinsurance coverage.
The Casablanca Re 2017-1 cat bond is being brought to market by Rewire Securities LLC, acting as the sole structuring agent and bookrunner for this new transaction, we understand.
Avatar, a property insurer formed to serve the Florida market in 2008, underwrites a portfolio of homeowners’ insurance, condominium insurance, manufactured home insurance, and commercial building insurance. The insurer has grown its portfolio through the Florida Citizens takeout program and through acquisitions, most recently having purchased Elements Property Insurance Company to further increase its scale.
Casablanca Re Ltd., a newly formed Cayman Islands special purpose insurance vehicles, will issue three tranches of Series 2017-1 cat bond notes that will be sold to cat bond investors to collateralize reinsurance agreements between it and Avatar.
The three tranches of notes and underlying reinsurance agreements will provide Avatar with a fully-collateralized source of protection against losses from named storms striking the state of Florida across a three year term, with the protection on a per occurrence basis and each tranche having an indemnity trigger linked to Avatar’s losses.
A $55.15 million tranche of Class A notes will have an initial attachment probability of 1.13%, an initial expected loss of 0.8% and are being offered to cat bond investors with coupon price guidance of 3.25% to 4%.
A $21.7 million Class B tranche of notes have an attachment probability of 4.13%, an expected loss of 1.77% and price guidance in a range from 5% to 6%.
Finally, the riskiest tranche of notes are a $23.15 million Class C, with an attachment probability of 17.26%, an expected loss of 9.93% and are offered to investors with price guidance of 16% to 18%.
The three tranches of Casablanca Re 2017-1 cat bond notes will provide Avatar with a layered source of capital market reinsurance protection, wrapping around (so providing cover below, alongside and above) its FHCF coverage layer.
We understand that the Casablanca Re 2017-1 catastrophe bond issuance will be completed in late May, so in time for the main June 1st renewal of Florida property catastrophe reinsurance market cover.
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