Great American Insurance Group has returned to insurance-linked securities (ILS) for what will be its third and likely largest catastrophe bond issuance, with a $200 million Riverfront Re Ltd. (Series 2021-1) transaction now being offered to the ILS market’s investor-base.
Great American Insurance Group, which is the insurance operations part of American Financial Group, entered the catastrophe bond market in search of capital markets backed reinsurance for the first time in 2014 with a $95 million Riverfront Re Ltd. (Series 2014-1) transaction that matured at the end of 2016.
This coverage was then renewed and upsized in May 2017 with a $190 million Riverfront Re Ltd. (Series 2017-1) transaction that matured at the end of 2020.
Now, Great American Insurance is back with another new cat bond in advance of the US named storm season, this time seeking at least $200 million of fully-collateralized and multi-peril reinsurance from a Riverfront Re 2021 issuance.
Riverfront Re Ltd., a Bermuda domiciled special purpose insurer (SPI), will seek to issue two tranches of notes that will be sold to ILS investors and the proceeds used to collateralize two reinsurance agreements between the SPI and sponsor Great American.
The two tranches of notes will both provide Great American Insurance with multi-year collateralized reinsurance protection from the capital markets across a roughly three and a half year term, to end of December 2024, we understand.
The reinsurance protection provided will be on a per-occurrence basis from both tranches issued, while the covered perils are the same as the 2017 transaction, being U.S. and Canada named storms, earthquakes, severe thunderstorms, winter storms, wildfires, meteorite impact, and volcanic eruption.
Riverfront Re will issue a tranche of Class A notes that are targeted to be at least $150 million in size and will cover losses from an attachment point of $200m up to exhaustion at $450m, giving room for some upsizing, we’re told.
The Class A notes will have an initial expected loss of 0.92% and are being offered to cat bond investors with price guidance of 3.75% to 4.5%.
A Class B tranche is currently sized at $50 million and will cover losses from an attachment point of $125m, up to an exhaustion point of $200m, so sit beneath the A notes and are riskier as a result. Again there is some room for upsizing.
The riskier Class B notes will have an initial expected loss of 2.65% and are being offered to cat bond investors with price guidance of 6.5% to 7.5%, we understand.
The catastrophe bonds will provide Great American Insurance with reinsurance across a subset of its commercial property insurance book, sources said and also cover certain losses from affiliates of the insurer, including National Interstate Insurance and Mid-Continent Casualty.
It’s encouraging to see Great American Insurance back and making catastrophe bonds a core piece of its reinsurance program, with a new Riverfront Re issuance that looks likely to be its largest yet and has room to upsize should investor demand allow.
We’ll keep you updated as this new Riverfront Re Ltd. (Series 2021-1) cat bond transaction comes to market and you can read all about this and every other catastrophe bond in the Artemis Deal Directory.