Swiss Re Insurance-Linked Fund Management

Xactanalysis Insights and PCS

Gator Re cat bond secondary price rises despite rising loss estimate


Despite the fact that qualifying losses have further eroded the aggregate retention layer beneath the trigger point of the Gator Re Ltd. catastrophe bond transaction, the latest secondary market trading price has risen this week.

Artemis reported on Monday 5th September that estimated losses have now reached almost 85% of the way to the attachment point for the Gator Re cat bond’s aggregate reinsurance protection ‘section b’ layer, as severe thunderstorm activity caused the sponsor to report a rising loss tally.

Despite that ILS investors clearly still remain interested in the Gator Re cat bond notes, with a trade reported through Finra’s TRACE data service on the 8th September being completed at a price of 92.5 cents on the dollar.

In mid-June the Gator Re cat bond notes had traded as low as 76 cents on the dollar, but a steady recovery in secondary market value was seen over the last couple of months, as the notes traded at 80, 80.5 and then 82.5 by July.

The recovery has continued, despite the rising loss estimate, which possibly reflects investor sentiment that the U.S. severe thunderstorm and tornado season has now passed its peak.

However, with aggregate losses now at 85% of the trigger amount it seems feasible that any significant outbreak of severe thunderstorm, tornado or hail event losses could take the Gator Re cat bond much closer to or over the trigger point.

It seemed more likely that any trading would be at a lower price, given the rise in losses in the latest report from the ceding company Florida primary insurance firm American Strategic Insurance.

But with the reinsurance risk period for the Gator Re cat bond running to the end of the year and the severe thunderstorm season now considered past its peak, it seems at least one ILS investor is happy to take on the risk in the hope of a maturity at full value.

Also read:

Gator Re cat bond qualifying losses now 85% of way to trigger.

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