The latest catastrophe bond to hit the market and complete successfully in this busy Q4 of 2010 is a second issuance from Montana Re Ltd., Flagstone Re’s Cayman Islands domiciled SPV. Flagstone Re first tapped the capital markets for cover using Montana Re in November 2009 for $175m of multi-peril cat bond cover and have now returned to the market for a Series 2010-1 issuance.
This latest catastrophe bond is a multi-peril catastrophe bond and as with other recent multi-peril deals has been well received by investors who helped it upsize to $210m. The transaction provides Flagstone Re with three years of fully collateralized retrocessional coverage through Montana Re.
Montana Re 2010 is split into three tranches and provides Flagstone Re with cover against U.S. hurricane and earthquake, Japan typhoon and earthquake, European windstorm, and for the first time, Cayman Islands hurricane. The deal utilises the Risk Management Solutions (RMS) Paradex model and in index-trigger.
The three tranches are split as follows: $70m of Series 2010 – 1, Class C Principal-at-Risk Variable Rate Notes due January 8, 2014, $80m of Series 2010-1, Class D Principal-at-Risk Variable Rate Notes due January 8, 2014, and $60m of Series 2010-1, Class E Principal-at-risk Variable Rate Notes due January 8, 2014. The Class C notes cover losses from U.S. hurricanes and earthquakes on a per-occurrence basis and received a rating of ‘B’ from Standard & Poor’s. The Class D notes we believe cover the Cayman Islands hurricane risks but were not rated by S&P. The Class E notes cover losses from second and subsequent U.S. hurricane and earthquake, European windstorm, and Japan earthquake and typhoon on an annual aggregate basis and S&P rated them ‘B-‘.
Flagstone Re CEO, David Brown, commented: “We are very pleased with the result of this transaction. We have continued to demonstrate our ability to access the capital markets to diversify our sources of coverage and have benefited from the efficiencies of purchasing cover over multi-year periods. These transactions continue to reinforce our capital strength and attractiveness as a quality partner for our clients.”
As ever, full details of this transaction are in our Deal Directory and will be added to as more structural details emerge.