U.S. primary insurer Chubb’s latest catastrophe bond, the East Lane Re VI Ltd. (Series 2015-1) U.S. multi-peril deal, will complete at an upsized $250m, while the pricing settled at the mid-point of original guidance.
Chubb’s East Lane Re VI 2015-1 cat bond launched almost two weeks ago with the insurer looking to secure a new five-year source of fully-collateralized reinsurance protection against losses from multiple U.S. perils. The deal launched as a single Class A tranche of notes with a preliminary size of $225m.
In the next update on the transaction the cat bond looked set to upsize, as sources suggested a range of $225m to $250m for the single tranche of notes. At the same time the coupon price guidance was narrowed from the initial 3.5% to 4% to 3.5% to 3.75%.
Now, we understand that Chubb has upsized the deal and the East Lane Re VI cat bond will complete at $250m in size. The pricing however did not continue downwards and has settled at 3.75%, the upper end of the narrowed range or the mid-point of the deal’s launch coupon guidance.
This reflects the ongoing ambition of ILS investors to establish a floor beyond which pricing will not slip. This seems to be driven by a desire for a return delivering reasonable multiples of expected loss. In the case of this cat bond, with pricing of 3.75% and an expected loss of 1.24%, investors have secured a multiple of 3X.
So with East Lane Re VI Chubb will benefit from a $250m five-year source of indemnity reinsurance cover for losses from U.S. named storms, earthquakes, severe thunderstorms, winter storms, wildfires, meteorite impact and volcanic eruption risks on a per-occurrence basis and using an indemnity trigger.