Swiss Re Insurance-Linked Fund Management

Original Risk: A Society for Change Agents

First Coast Re cat bond prices at bottom of reduced spread guidance


The first catastrophe bond issued for Security First Insurance Company, the First Coast Re Ltd. (Series 2016-1) cat bond deal, is now set to complete at the reduced amount of $75m and the pricing has fallen to the bottom end of the already reduced spread guidance range.

Initially the cat bond issuance had targeted securing up to $100m of fully collateralised reinsurance protection for the Floridian primary property insurance company Security First, via a reinsurance agreement with Swiss Re.

But, as was reported by another publication this week and confirmed by sources, a private transaction saw a reinsurer (Everest Re) take a quarter of the risk and the cat bond has now settled at an issuance of $75m of notes.

The price guidance for the single tranche of Series 2016-1 notes being issued by First Coast Re dropped earlier this week, from the initial range of 4.25% to 4.75% down to 4% to 4.25%.

Sources said that the notes have now priced at the low-end of the reduced spread guidance and will pay investors a coupon of 4% from launch.

With an expected loss of 1.15% the notes will still offer ILS investors a multiple of almost 3.5 times the EL, which remains very attractive, in terms of risk/return, despite the fact that Security First Insurance is a first time cat bond sponsor.

It’s encouraging to see the ILS investor community back this first time sponsor and investor appetite enable the spread to come down, while still offering a very attractive multiple of expected loss. So investors remain compensated for any uncertainty as well as top and drop nature of the protection this cat bond provides.

The transaction is set for launch at the end of the month. 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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