Hamilton Insurance Group, the Bermuda-based holding company, has announced its first ever catastrophe bond, as its reinsurance unit Hamilton Re has sponsored a $60 million Cerulean Re SAC Ltd. (Easton 2019-1) multi-peril transaction.
The cat bond transaction has been issued using reinsurance broker Guy Carpenter’s cat bond issuance vehicle Cerulean Re SAC Ltd., through a single segregated account named Easton 2019-1.
Cerulean Re SAC Ltd. has issued a $60 million tranche of Series 2019-1 Principal At-Risk Variable Rate catastrophe bond notes, acting for the Easton 2019-1 segregated account.
The $60 million of notes have been sold to cat bond investors and the proceeds will collateralize reinsurance agreements with Hamilton Re, providing the reinsurer with a source of capital markets backed retrocessional protection.
The coverage protects Hamilton Re against certain losses from the perils of U.S named storms and US earthquakes, across two tranches of notes, on an industry loss trigger and per-occurrence basis.
We assume that the tranches will each represent a different layer of risk in Hamilton Re’s retro program, so providing ILS investors different risk and return profiles.
The transaction has mixed terms across the different notes issued. The U.S. wind tranche covers a risk period ending Dec 31st 2019, so a single hurricane season, while the U.S. earthquake tranche covers a risk period ending May 31st 2020.
“This cat bond will provide additional, diverse reinsurance protection for our portfolio, alongside our traditional reinsurance coverages, and serve to further enhance our positioning within the capital markets,” Hamilton Re CEO Kathleen Reardon commented on the cat bond deal.
“Successfully navigating this solution amongst broader market uncertainties is evidence of Hamilton Re’s progress in this space and further strengthens our ability to serve our clients,” Reardon continued.
The Cerulean Re vehicle was established in 2017 by Guy Carpenter’s capital markets and ILS specific unit GC Securities and parent MMC’s Marsh Captive Solutions unit as an efficient vehicle for issuing catastrophe bonds on client sponsors behalf’s.
This is the first transaction from the vehicle that we have visibility of and that has been entered into our catastrophe bond Deal Directory.
GC Securities acted as sole arranger, structuring agent and placement agent or bookrunner for this Hamilton Re sponsored catastrophe bond.
Law firm Mayer Brown LLP acted as legal counsel for the transaction.
It’s encouraging to see another reinsurer turning to the catastrophe bond market for a slice of its retrocessional protection in 2019, demonstrating the attractiveness of this market for new sponsors.
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