Latest Johnston Re Ltd. catastrophe bond closes successfully

North Carolina hurricane risk catastrophe bond Johnston Re Ltd. Series 2011-1 has closed successfully at a size of just under $202m, slightly upsized from the initial offering amount that the deal was marketed to investors at. This brings cat bond market issuance for 2011 to over $1.4 billion according to data from our catastrophe bond Deal Directory.

The deal is the second cat bond which provides U.S. hurricane cover to Munich Re America for a reinsurance agreement they have with two North Carolina non-profit insurance associations, the North Carolina Joint Underwriters Assn. (NCJUA) and the North Carolina Insurance Underwriters Assn. (NCIUA). The deal covers losses directly linked to losses experienced by the two NC insurance associations members and they in turn have a retrocessional agreement with Munich Re America. Hurricane losses are covered on a per occurrence basis. Last year Munich Re issued $305m of cat bond notes under the Cayman Islands domiciled SPV Johnston Re Ltd. in a Series 2010-1 deal. This latest Johnston Re deal replaces cover afforded to the North Carolina insurance associations from their 2009 Parkton Re cat bond which matured this month.

Pricing closed at the upper end of expectations according to investors we’ve spoken with which is fairly typical of U.S. hurricane exposed cat bonds issued at this time of year.

The deal is split into two tranches, $70m of Class A notes and $131.85m of Class B notes. Both tranches have been rated ‘BB-‘ by Standard & Poor’s and both are due to mature in May 2014.