Great American Insurance Group has now secured the upsized target of $305 million of reinsurance protection with its new Riverfront Re Ltd. (Series 2021-1) catastrophe bond transaction.
Great American Insurance came back to the catastrophe bond market for its third issuance in advance of the US named storm season just over a fortnight ago.
To begin, the insurer was seeking $200 million or more of fully-collateralized and multi-peril reinsurance from this Riverfront Re 2021 cat bond issuance, which would make this deal its largest so far.
Thanks to investor appetite, Great American has maximised its reinsurance from this trip to the catastrophe bond market, growing the issuance by almost 53% to $305 million.
Bermuda domiciled special purpose insurer (SPI) Riverfront Re Ltd. is now set to issue two tranches of notes that will together provide Great American Insurance with $305 million of multi-year collateralized reinsurance protection from the capital markets across a roughly three and a half year term, to end of December 2024.
The now $305 million of indemnity triggered reinsurance coverage from the notes will be on a per-occurrence basis, from both of the tranches issued, while the covered perils are the same as Great American’s 2017 Riverfront Re transaction, so U.S. and Canada named storms, earthquakes, severe thunderstorms, winter storms, wildfires, meteorite impact, and volcanic eruption.
The Class A notes tranche of notes began with a target for $150 million of cover, for losses from an attachment point of $200m up to exhaustion at $450m, but the target then increased to between $215 million and $235 million.
At pricing, the Class A notes upsized to the maximum at $235 million in size.
The Class A notes have an initial expected loss of 0.92% and were originally offered to cat bond investors with price guidance of 3.75% to 4.5% and were subsequently priced at 4.25%, so slightly above the initial mid-point.
It’s interesting as almost every other cat bond in recent months has priced below its spread guidance mid-point, many significantly so. It’s encouraging to see cat bond investors demanding a return they felt was commensurate with the risks being taken on and provides evidence that not every deal can or should price down, even with cat bond market pricing appearing softened through recent issues.
The Class B tranche of notes began at $50 million in size and then secured the upsized target of $70 million at pricing, so will cover the majority of the layer from their attachment point of $125m, up to an exhaustion point of $200m.
These riskier Class B notes, with an initial expected loss of 2.65%, were initially offered to cat bond investors with price guidance of 6.5% to 7.5%, which at pricing was fixed at the low-end of 6.5%.
So Great American Insurance is now set to secure its largest catastrophe bond yet with this issuance.