Swiss Re Insurance-Linked Fund Management

Original Risk: A Society for Change Agents

Frontline & First Protective’s new Astro Re cat bond issue to slip to July


We understand from sources that issuance of the Astro Re Pte. Ltd. (Series 2021-1) catastrophe bond that is being sponsored by U.S. primary insurance group Frontline Insurance on behalf of itself and subsidiary First Protective, has been slower than anticipated and now the transaction is expected to fall into the third-quarter.

frontline-insurance-logoAs we explained back on June 8th, Frontline and its subsidiary insurance carrier First Protective were seeking US named storm reinsurance protection from the capital markets with what will be its second catastrophe bond.

However, the Astro Re cat bond, which is being issued out of Singapore, had been slated to price week commencing June 21st and complete week commencing June 28th, with an expected settlement still during the month of June.

Now, we’re told that there haven’t, as yet, been any updates of note related to the cat bond and that while its issuance is progressing, it is most likely to settle in July now, becoming a Q3 cat bond deal.

As a reminder, the sponsors previous insurance-linked securities (ILS) deal, the $350 million Frontline Re Ltd. (Series 2018-1) catastrophe bond transaction, is facing losses and as a result one tranche of its notes has been trading at almost rock-bottom pricing on the threat of losses from hurricane Michael hitting the attachment point.

As of the latest pricing sheets we’ve seen, the riskier Class B tranche of notes issued by Frontline Re are currently marked down for bids as low as 5 cents on the dollar, reflecting the market’s expectation that this layer could face a total loss.

That Class B layer had originally been $100 million in size, but we understand there have already been some reinsurance recoveries under it, with just $23.63 million of principal left outstanding from it.

At the same time, the $250 million of Class A notes issued as part of the Frontline Re 2018 cat bond are still marked down for bids of anywhere between 55 and 70 cents on the dollar, depending on which secondary market pricing sheet you look at.

Which again suggests the ILS investor community is not convinced this tranche will not face losses as well.

We’re told that the ongoing development of potential losses under the Frontline Re cat bond has served to slow down the process with the new Astro Re cat bond.

But we’re also told by cat bond investor sources that the issuance of Astro Re is expected to continue, but that it could just take a little longer than anticipated as investors get their questions answered.

You can read all about this new Astro Re Pte. Ltd. (Series 2021-1) catastrophe bond from Frontline and every other cat bond ever issued in our Artemis Deal Directory.

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