Swiss Re Insurance-Linked Fund Management

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First Coast Re cat bond cascading protection adds flexibility: GC Securities


The cascading nature of the per-occurrence fully collateralised reinsurance protection provided by the recently completed First Coast Re Ltd. (Series 2016-1) catastrophe bond provides its beneficiary Security First Insurance Company with flexible protection, according to GC Securities.

GC Securities, the investment banking and capital markets focused unit of reinsurance broker Guy Carpenter, acted as joint structuring agent and joint bookrunner for Security First Insurance’s first visit to the cat bond market.

The $75m First Coast Re cat bond transaction secured the insurer a source of per occurrence based, indemnity triggered reinsurance coverage from Florida named storms and severe thunderstorms (including tornado and hail events), across a three-year transaction term and via a reinsurance agreement with Swiss Re which acted as the sponsor.

The single $75m tranche of Class A notes issued by Bermuda domiciled special purpose insurer First Coast Re Ltd. have been structured with a “top & drop” cascading feature, which allows the attachment level to adjust through an annual risk period as covered events occur, qualify and erode Security First Insurance’s other layers of reinsurance protection, that inures to the benefit of the cat bond.

Cory Anger, Global Head of ILS Structuring at GC Securities, explained the flexibility this structure offers the sponsor; “We are honored to have supported Security First Insurance’s initial foray into the cat bond space. The cascading per occurrence protection was designed with significant flexibility to respond to the covered events of Named Storms and Severe Thunderstorms from a severity and frequency perspective through the cascading feature within an annual risk period as well as through a variable annual reset to adjust the position of such protection layer in future years.”

The $75m of Series 2016-1 Class A notes issued by First Coast Re will compensate investors with a 4% coupon, above the collateral return, and feature an annual attachment probability of 1.37% and annual expected loss of 1.31% based on risk modelling from AIR Worldwide.

The notes received strong investor interest, helping the transaction to settle at the 4% coupon, which is below the initially marketed guidance of 4.25% to 4.75%.

Chi Hum, Global Head of ILS Distribution, GC Securities, commented on investors reception for the transaction, saying; “The strong support of more than 20 participating investors for the Series 2016-1 Notes demonstrates the investor base’s respect for Security First Insurance’s management and approach to underwriting and claims handling in Florida.”

You can read all about the First Coast Re Ltd. (Series 2016-1) cat bond and every other catastrophe bond transaction in the Artemis Deal Directory.

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