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Great American to lift Riverfront 2021 cat bond to $285m-$305m


Great American Insurance Group is another sponsor looking to maximise its reinsurance protection from the capital markets this year and take advantage of strong cat bond market execution, with its Riverfront Re Ltd. (Series 2021-1) transaction now targeting up to $305 million of protection for the company.

great-american-insurance-group-logoGreat American Insurance returned for its third cat bond issuance in advance of the US named storm season around a fortnight ago.

With the deal, the insurer was initially seeking at least $200 million of fully-collateralized and multi-peril reinsurance from the Riverfront Re 2021 issuance, which would make this deal its largest to-date.

Now, the Riverfront Re 2021 cat bond is definitely going to be the carrier’s largest, as the target has been increased, to between $285 million and as much as $305 million.

Bermuda domiciled special purpose insurer (SPI) Riverfront Re Ltd. will issue two tranches of notes to 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.

The reinsurance protection will be on a per-occurrence basis, from both of the tranches issued, while the covered perils are the same as the 2017 Riverfront Re transaction, being U.S. and Canada named storms, earthquakes, severe thunderstorms, winter storms, wildfires, meteorite impact, and volcanic eruption.

A Class A notes tranche of notes had originally targeted $150 million of cover, for losses from an attachment point of $200m up to exhaustion at $450m. We’re now told that this tranche is likely to settle at between $215 million and $235 million.

These now larger tranche of Class A notes will have an initial expected loss of 0.92% and were first offered to cat bond investors with price guidance of 3.75% to 4.5%. Now, the price guidance has been fixed at 4.25%, we understand, which is interesting in being actually slightly above the initial mid-point, when every other cat bond of late has priced down, some significantly.

The Class B tranche of notes began as a $50 million layer, but we’re now told this has been increased to $70 million in size, so will cover 100% of the layer from their attachment point of $125m, up to an exhaustion point of $200m.

The riskier Class B notes, with an initial expected loss of 2.65%, were first offered to cat bond investors with price guidance of 6.5% to 7.5%, but we’re told this has now been fixed at the low-end of 6.5%.

So Great American Insurance looks set to upsize on its cat bond backed reinsurance, compared to its $190 million Riverfront Re Ltd. (Series 2017-1) transaction that matured at the end of 2020.

It’s encouraging to see the sponsor add to its cat bond coverage with each of its issues and look to upsize it despite one tranche being set to price at a level slightly higher than the original mid-point of guidance.

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.

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