The issuance of the first catastrophe bond transaction to be arranged using the new UK Risk Transformation Regulations 2017, the $300 million Atlas Capital UK 2018 PLC (Series 2018 ISPV 1) transaction, received “strong investor support” but execution was only “relatively smooth”, according to sole structuring agent and bookrunner GC Securities.
The first full United Kingdom domiciled catastrophe bond, the Atlas Capital UK 2018 catastrophe bond provides its sponsor the French reinsurer SCOR with $300 million of multi-peril retrocessional reinsurance protection across a four-year term and on an annual aggregate basis.
GC Securities, the capital markets investment banking and ILS focused unit of reinsurance broker Guy Carpenter, acted as the sole structuring agent and bookrunner for the first cat bond under the UK risk transformation legislation.
The transaction used what is only the second insurance special purpose vehicle domiciled in the UK, Atlas Capital UK 2018 PLC and the proceeds of the sale of the notes to investors will provide the collateral to back the reinsurance agreements that cover SCOR against losses from losses from U.S. named storms including in Puerto Rico and the U.S. Virgin Islands, U.S. and Canada earthquake and European windstorm risks.
Des Potter, Managing Director at GC Securities, commented on the completion of the transaction, “We are delighted to have successfully completed the first ever 144A cat bond to be issued under the UK Risk Transformation Regulations 2017.
“This pioneering transaction had strong investor support and a relatively smooth execution, due in part to the responsiveness of the Prudential Regulation Authority (PRA). The decision by SCOR, a leading global reinsurer, to use the new UK regime was a bold decision and is a major boost for the competitiveness of the UK (re)insurance industry.”
“Relatively smooth execution” does make it sound like there are still lessons to be learned and improvements to be made, in the issuance process under the new UK legislation. But it’s possible these are just teething troubles and we’d imagine they could be linked to the approval process under the regulator, given it is still a new set of rules.
It will likely take some time for execution issues to be ironed out, as the regulator gets up to speed and dedicates resource to respond to issuers needs, but this is typically the case with all new legislation, financial markets related or otherwise.
David Priebe, Vice Chairman, Guy Carpenter, added, “We are honored to have been selected to act as the sole structurer and bookrunner by SCOR on this pioneering transaction. New ground was broken with this transaction and I am pleased that the investment of Guy Carpenter in the London Market Group’s ILS Taskforce is bearing fruit, which will ultimately benefit our clients as we broaden their risk transfer options.”
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