Insurance and financial services group AmTrust is set to secure an efficiency priced layer of fully-collateralized reinsurance coverage from the capital markets, as the pricing has now been fixed at the bottom end of already reduced guidance for its first catastrophe bond, the $100 million Fortius Re II Ltd. (Series 2017-1) deal.
AmTrust’s first broadly marketed cat bond, the Fortius Re II Ltd. will secure the sponsor an ILS-backed source of both property and workers compensation reinsurance coverage through a single $100 million Class 1 tranche of notes that offers two sections of coverage.
Certain losses from U.S. named storm, U.S. earthquake and Canada earthquake will be covered across a four-year term, but with one Section A limit offering indemnity property reinsurance protection for all covered perils on a per-occurrence basis, while a Section B limit covers modelled losses to a workers compensation portfolio from earthquake impacts across the U.S. and Canada also on a per-occurrence basis.
The deal launched with coupon price guidance in a range from 4% to 4.5%, which we had said at the time was generous given the initial expected loss.
The price guidance then dropped to below the initial range, with the deal aiming to secure AmTrust its coverage at a coupon of between 3.75% and 4%.
Now, we’re told the coupon has been fixed at the bottom end of that reduced guidance, so the Fortius Re II cat bond will pay investors a 3.75% spread.
At this pricing level and with the notes have an initial expected loss of 1.11%, the notes still offer their investors a high multiple for what is a relatively low-risk deal, likely top compensate for the modelled loss aspect of Section B, which is an innovative addition to a cat bond transaction
The Fortius Re II Ltd. (Series 2017-1) catastrophe bond transaction is set for completion early next week. You can read about this and every other catastrophe bond transaction in the Artemis Deal Directory.