The recently completed $350 million Frontline Re Ltd. (Series 2018-1) catastrophe bond transaction, which benefits cedant Frontline Insurance, was the largest cat bond sponsored by a Florida insurer since 2014 and was well-received by investors, the structurer Swiss Re said.
Global reinsurance firm Swiss Re’s investment banking division Swiss Re Capital Markets acted as both sole structuring agent and sole bookrunner for the transaction, which marked Frontline’s first time in the catastrophe bond market.
Artemis tracked the issuance of the Frontline Re cat bond, having first reported on it in May when the deal was initially marketed to ILS funds and investors.
The deal saw Frontline Insurance looking to the capital markets for a $350 million source of fully-collateralized reinsurance protection, to cover Frontline Insurance and subsidiary First Protective against losses from U.S. named storms (so tropical storms and hurricanes) initially for the states of Florida, North & South Carolina and Alabama, but with the ability to be extended to cover additional states in future.
The transaction experienced strong demand as investors reception was positive to what Swiss Re highlighted is the largest cat bond from a private Florida cedant insurer, so not including Citizens, since 2014.
This strong demand and positive reception helped the Frontline Re Ltd. transaction achieve the upper-end of its size target, at $350 million, while at the same time the coupon dropped as pricing tightened for the cat bond.
Jean-Louis Monnier, Co-Head of ILS at Swiss Re Capital Markets, commented on the transaction. “Swiss Re is pleased to provide support to Frontline on its debut catastrophe bond issuance. The transaction was well received by investors, and is the largest for a Florida insurer since 2014.”
The Frontline Re cat bond deal also featured a novel event-adjusted attachment point, designed by Swiss Re to be based on the event size rank of a named storm within an annual risk period.
The cat bond will provide Frontline with four years of reinsurance protection across two tranches of notes that were issued and sold to investors.
“The innovative cat bond combines structural mechanics of the Florida Hurricane Catastrophe Fund (“FHCF”) as well as features of Frontline’s private reinsurance coverage and therefore seamlessly integrates with Frontline’s reinsurance program,” Monnier said.