Hamilton’s new Easton Re Pte. Ltd. (Series 2020-1) catastrophe bond transaction has now been priced at the low-end of already reduced guidance, with the coupon now fixed some 16% lower than the initial guidance mid-point.
Hamilton, the Bermuda based insurance and reinsurance holding company, will be delighted with the result of its first full catastrophe bond issuance, having secured the targeted catastrophe reinsurance protection at lower than anticipated pricing.
It is the first full 144A catastrophe bond transaction to be sponsored by Hamilton and also sees the company looking to Singapore as the domicile of issuance.
As we explained at the start of December, Hamilton was expected to enter the 144a catastrophe bond market with a first full cat bond deal that would be issued out of Singapore.
Further details of the issuance then became available, as it became clear that Hamilton was looking for a three-year , $150 million source of U.S. named storm and U.S. earthquake retrocessional reinsurance using the recently incorporated Easton Re Pte. Ltd. special purpose reinsurance vehicle domiciled in Singapore.
The Easton Re Pte. cat bond has not changed in size, with the Singapore based issuer now set to sell a $150 million tranche of Series 2020-1 Class A notes to cat bond investors, with the proceeds used to collateralize retrocessional reinsurance agreements between the special purpose reinsurance vehicle and a range of Hamilton’s subsidiaries, including its reinsurer Hamilton Re and its Lloyd’s managing agent.
The $150 million of catastrophe reinsurance protection will cover Hamilton and its underwriting units against losses from U.S. named storms (inc. Puerto Rico, US Virgin Islands, DC) and U.S. earthquakes (inc. DC), across a three year term, on a state weighted industry loss trigger and per-occurrence basis.
The notes issued by Easton Re Pte., which have an initial expected loss of 1.48% at the base case, were first offered to inevstors with coupon price guidance in a range from 4.5% to 5%.
As we explained in an update earlier this week, investor appetite for the Easton Re cat bond deal meant that the pricing was likely to drop and as a result the guidance range was lowered to 4% to 4.5%.
Now, we’re told that the pricing has been finalised and it was fixed at the low-end of the reduced guidance range, so offering a 4% coupon.
That represents a roughly 16% drop in pricing from the mid-point of initial guidance, a significant saving from where the cat bond costs were originally envisaged and as a result another example of the appetite of investors to support large and respected sponsors of catastrophe bonds around this renewal season.