Gator Re cat bond matures (finally)

The stricken Gator Re Ltd. catastrophe bond has finally matured and its notes have been delisted, which means any remaining principal will now either have been paid out to the sponsor American Strategic Insurance to cover its losses, or returned to investors.

American Strategic was hit by severe thunderstorm claims throughout 2016, which resulted in the Gator Re catastrophe bond facing a partial repayment event at its scheduled maturity and an extension of $35 million of principal, while the final loss amount was calculated.

The Gator Re cat bond provided American Strategic with $200 million of fully-collateralized reinsurance protection against losses from named storms and severe thunderstorm on an annual aggregate basis.

It was the aggregation of severe convective storm losses that hurt the cat bond, with the tropical storm season having been so benign in 2016. The result was that aggregate losses reached above the attachment point, meaning American Strategic could benefit from a reinsurance payout from the cat bond.

Qualifying estimated losses for the Gator Re catastrophe bond had reached $195 million at the end of November 2016, when the cat bonds re-set attachment point was just $175 million, suggesting a $20 million loss of principal to investors already by that stage.

An extension notice was then filed in early January, suggesting a partial repayment event and retention of $35 million of the outstanding cat bond principal, which was higher than the figure anticipated after the November 2016 loss report, but provided a buffer for any further claims development.

That meant that the other $165 million of the $200 million catastrophe bond was returned to investors, which may have been a premature move as by April of this year American Strategic’s loss estimate had risen to $213.6 million, which would fully erode the retained principal.

But it’s taken another few months for the final payout to be made, with the collateral remaining having dwindled down as American Strategic had taken payments, and by August the remaining collateral was just around $5 million.

The cat bond was extended again through September and October, but finally the Gator Re notes have matured suggesting that American Strategic will have received its $35 million payout.

So the payout has taken approximately 11 months in total, from the first extension notice in early January to the maturing of the Gator Re cat bond notes yesterday.

American Strategic had reported as far back as February that it expected to make a $29.5 million reinsurance recovery under the terms of the Gator Re cat bond, but it seems safe to assume that now with the insurers aggregated losses having risen above the retained $35 million amount that all of the principal has been paid out to the sponsor.

Gator Re is listed in our Directory of defaulted and paid out catastrophe bonds.

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