American Integrity Insurance Company of Florida, Inc.’s first catastrophe bond issuance has increased in size while being marketed to ILS investors, resulting in a $210 million target for the Integrity Re Ltd. (Series 2017-1) transaction at lower price guidance.
The Integrity Re 2017-1 cat bond transaction is being issued with Hannover Re acting as the ceding reinsurance entity, while Floridian primary insurance group American Integrity Insurance is the reinsured and so ultimate beneficiary of the protection the cat bond will offer.
When the Integrity Re 2017-1 cat bond launched back in March the deal was targeting a $178 million source of collateralized reinsurance protection for Florida named storms and severe thunderstorms, across a three year term and on an indemnity and per-occurrence basis for American Integrity.
We understand that the target deal size has been lifted, with the cat bond now set to secure $210 million of reinsurance protection for the reinsured American Integrity. At the same time we understand the price guidance has been narrowed and also lowered, in response to cat bond and ILS investor demand.
Featuring four tranches of notes, the deal offers a range of risk and return profiles to ILS investors, however it is clear where the appetite for this first Integrity Re cat bond lies.
The Class A tranche of notes which launched at $50 million in size and offers second event protection against losses from Florida named storms only has upsized to $72 million we understand. The initial coupon price guidance of 3.5% to 4% has been lowered to 3.25% to 3.5%, reflecting demand for more Florida named storm risk among investors.
The Class B tranche remains at just $3 million in size, offering cover for Florida named storms on a second and subsequent event basis. The coupon guidance for this small tranche which began at 13.75% to 14.5%, is now set to price at the upper end we’re told, at the 14.5% level.
The Class C tranche has also not upsized and remains as $100 million, offering Florida named storm cover for first and subsequent events. The initial price guidance for this tranche, of 4% to 4.5%, has fallen to the bottom end at 4% we understand.
Finally, the Class D notes which began as a $25 million tranche have now upsized to $35 million, and cover Florida named storms and severe thunderstorms, both on a first and subsequent event basis. The price guidance of 4.5% to 5% has been lowered to 4.25% to 4.5% at the latest update.
So this Integrity Re 2017-1 catastrophe bond has increased in size and the pricing has largely moved down, aside from the riskiest and very small Class B tranche.
For the ultimate beneficiary and sponsor, American Integrity Insurance, this first visit to the cat bond market is going to offer it a significant chunk of its reinsurance program on a collateralized basis and at attractive rates, like so many other catastrophe bond sponsors have found in 2017.