Everglades Re II grows to $300m, prices near top of extended guidance

Share

Florida’s Citizens latest Everglades Re II Ltd. (Series 2015-1) catastrophe bond has now been priced. The cat bond has now upsized by 20% to $300m, while the final pricing almost reached the top of the expanded guidance, as Citizens finalised a $3.9B risk transfer programme for 2015.

When the Everglades Re II cat bond was launched a fortnight ago the single tranche of Series 2015-1 Class A notes with a preliminary size of $250m. With the issuance Citizens was seeking to grow the capital markets contribution to its efforts to become better protected and reduce the need for assessments on taxpayers after major hurricanes.

The cat bond will provide a source of fully-collateralized reinsurance protection for Florida named storm risks (so covering tropical storms and hurricanes) on an annual aggregate basis and using an indemnity trigger. Losses from both personal and commercial residential property exposures in the Florida Citizens coastal account are to be covered over a three-year period.

The deal launched with pricing guidance in a range of 4% to 4.5%, but that price range was subsequently expanded, providing investors more room to indicate interest at a higher coupon, with a new guidance range indicating a potential yield from 4% to 5.25%.

Artemis understands that this was another example of investor push-back on a cat bond that they felt was being marketed at too low a price for the underlying risks. More details on that can be found in our previous article here.

At final pricing the $300m tranche of Everglades Re II cat bond notes have been priced at 5.15%, we understand. With an expected loss of 1.31% at the base case and 1.55% on a sensitivity case basis, that will provide a multiple of 3.9x EL at the base case and 3.3x at the sensitivity case.

So the investor push-back resulted in a coupon for this cat bond that is .65% above the initial guidance range. Someone was being very bullish with the launch guidance it seems, but Florida Citizens did the right thing and came to a pricing indication that investors were comfortable with.

The Everglades Re II Ltd. (Series 2015-1) catastrophe bond transaction is not yet in force, settling officially in a weeks time. You can read all about it in the Artemis Deal Directory.

Print Friendly, PDF & Email

Artemis Newsletters and Email Alerts

Receive a regular weekly email newsletter update containing all the top news stories, deals and event information

  • This field is for validation purposes and should be left unchanged.

Receive alert notifications by email for every article from Artemis as it gets published.

Read previous post:
Watford Re up to $400m GWP, combined ratio hovers close to 100

Watford Re, the hedge fund style hybrid reinsurance joint venture vehicle operated by Bermudian insurance and reinsurance group Arch Capital alongside...

Close