U.S. specialty insurance group Assurant has now successfully completed its fourth catastrophe bond with the $185m Ibis Re II Ltd. (Series 2013-1) deal. The completion of the deal has secured Assurant subsidiaries a multi-year source of collateralized U.S. hurricane reinsurance protection.
The Ibis Re II 2013-1 cat bond provides three-year, fully-collateralized U.S. hurricane reinsurance protection for Assurant subsidiaries American Security Insurance Co., American Bankers Insurance Co. of FL, Standard Guaranty Insurance Co., and Voyager Indemnity Insurance Co.
The three Series 2013-1 tranches of cat bond notes issued by Ibis Re II provide hurricane protection at different levels within Assurants reinsurance tower. All three of the tranches of notes are exposed to the same U.S. hurricane risk, across the main U.S. wind exposed states and also Puerto Rico. All three tranches use the Verisk Catastrophe Index as the trigger, meaning that the trigger will be a county-weighted industry loss index.
The deal grew slightly while marketing, upsizing from $175m to $185m before it priced. Pricing adjusted on all three tranches, with two pricing below the guidance and the lowest risk tranche actually pricing at the top of the originally marketed range, almost unheard of in cat bond deals this year. This is further evidence of new cat bonds being marketed with much more accurate pricing expectations and movement in pricing has been vastly reduced in recent deals.
The Class A, lowest risk, tranche of notes grew to $110m in size and priced offering a coupon of 4%, the top of the 3.5% to 4% range it was marketed at. The Class B notes stayed at $35m and have priced at 4.5%, the lower end of the original range. The Class C notes stayed at $40m in size and priced at 8%, again the lower end of the marketed price range.
Rating agency Standard & Poor’s has assigned its final issue credit ratings of ‘BB+(sf)’, ‘BB-(sf)’, and ‘B(sf)’ to the Series 2013-1 Class A, B, and C notes, respectively, issued by Ibis Re II Ltd.
S&P said; “The class A notes will cover 55% of losses between the initial attachment point of $1.86 billion and the initial exhaustion point of $2.06 billion. The class B notes will cover 5% of losses between the initial attachment point of $1.06 billion and the initial exhaustion point of $1.76 billion, and the class C notes will cover 10% of losses between the initial attachment point of $660 million and $1.06 billion.”
The three tranches of notes issued in this deal have all been admitted for listing on the Cayman Islands Stock Exchange under the existing Ibis Re II Ltd. principal-at-risk variable rate note program.