Swiss Re Insurance-Linked Fund Management

PCS - Emerging Risks, New Opportunities

Gator Re extension notice filed for up to $35m loss


An extension notice has been filed for the stricken Gator Re Ltd. catastrophe bond transaction that suggests a partial repayment event and retention of $35 million, which is higher than the figure anticipated after the November loss report was released, providing a buffer for further development.

Last week Artemis broke the news that the most recent loss report for the Gator Re cat bond showed an aggregate estimated loss impact of over $195 million at the end of November, while the attachment point for the bond is set at $175 million.

That suggested a complete erosion of the deductible and that a loss of principal of just over $20 million would be suffered by investors in the Gator Re bond. But our sources tell us that this figure has already risen and that the loss is now seen as around the $35 million mark.

An extension notice has been served, Artemis understands, which allows the sponsor to continue to calculate the reinsurance recoveries due from events that occurred during the annual risk period. During this extension period investors would receive a reduced coupon, we understand.

We’re told that this extension notice refers to a retention of $35 million of principal, which would be 17.5% of the $200 million of notes issued by Gator Re Ltd. back in 2014.

The reason for the partial extension for $35 million is to provide a buffer, above the November loss report, to allow for further deterioration of prior claims from qualifying severe thunderstorm loss events earlier in the year or any new events from December to be added.

At this time December appears to have been relatively benign and we understand that new events are not currently anticipated to qualify under the terms of Gator Re, so it seems the $15 million buffer is targeted at covering any further deterioration of claims from earlier in the year.

So it looks like the largest reinsurance recovery that sponsoring insurer American Strategic could claim back from Gator Re investors is currently set at $35 million, but the final total will not be known until the extension period is completed.

We’ll update you as and when any further information comes to light.

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Also read:

Gator Re investors face loss as claims exceed attachment point.

Gator Re losses near trigger, now over 94% of attachment point.

Gator Re cat bond secondary price rises despite rising loss estimate.

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