Farmers Insurance Group is now targeting up to $160 million of collateralized reinsurance protection from its first catastrophe bond, as the Topanga Re Ltd. (Series 2021-1) issuance grew during marketing, while its pricing was fixed at the upper-end of guidance.
Farmers Insurance, the US insurer that also operates across a number of reciprocal insurer brands and has links to Zurich Insurance Group, entered the catastrophe bond market for the first time recently, seeking at least $100 million of reinsurance through the Topanga Re cat bond.
The issuance is designed to provide Farmers with a multi-year source of both per-occurrence and annual aggregate catastrophe reinsurance protection, covering losses from named storms, earthquakes, severe weather and wildfires affecting the United States.
When the deal was launched, special purpose insurer Topanga Re Ltd. was aiming to issue a $100 million tranche of per-occurrence focused Class A notes and an unsized tranche of annual aggregate Class B notes.
The Class A tranche of notes remains $100 million in size and will provide Farmers with per-occurrence and indemnity trigger protection over a four-year term to the end of 2025, and have an initial expected loss of 1.49%.
The Class A notes were first offered to catastrophe bond investors with price guidance in a range from 4.25% to 4.75%, but we’re told that has now been fixed at the upper-end of 4.75%.
The Class B tranche of notes, which was unsized in the beginning, is we’re told set to secure between $50 million and $60 million of annual aggregate reinsurance protection for Farmers, over just a two-year term to the end of 2023.
The aggregate notes have an initial expected loss of 1.03% and continued to be offered to cat bond investors with the same fixed coupon of 15%.
It appears Farmers will definitely secure $150 million of reinsurance, perhaps $160 million from its first venture to the catastrophe bond market, with up to $60 million being aggregate reinsurance cover, which would be a good result for the company, as it has faced significant catastrophe impacts in recent years.
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