Maturity extended for lower tranche of joint-largest private cat bond, Aquarelle

One tranche of notes from the joint-largest private catastrophe bond issuance to ever hit the market, the $250 million Aquarelle Notes transaction, have had their maturity date extended, presumably to allow for development of qualifying catastrophe losses to identify whether this riskier layer from the deal could be triggered.

The Aquarelle Notes private catastrophe bond issuance came to market in May 2021 and became the joint-largest privately placed cat bond or insurance-linked securities (ILS) placement ever issued.

The transaction retains that title today alongside the 2010 deal Merna Re III, as no other private cat bond placement that we’ve listed in our extensive Deal Directory has neared that size since.

The transaction was named after the segregated account used to house the issuance, which was Aquarelle, but actually came to market via the Artex owned SAC vehicle in Bermuda, now named Artex Axcell Re (Bermuda) Limited since its rebrand.

At the time, the Artex structure issued a $50 million tranche of Series 2021 Class A principal-at-risk Aquarelle notes and a $200 million tranche of Series 2021 Class B principal-at-risk Aquarelle notes.

The maturity date for the notes was December 20th 2023 and we’ve now learned that the $50 million Class A tranche of notes have had their maturity date extended, while the larger $200 million Class B tranche were allowed to mature on schedule.

As we had reported in April 2022, we learned some more information about the Aquarelle private cat bond after its notes underwent a variable reset procedure.

The information we learned told us that the $200 million Class B tranche of Aquarelle private cat bond notes were the less risky layer of the issuance, having an attachment point at that time of $2.98 billion of losses to the sponsor behind the deal.

We also learned that the $50 million Class A tranche of Aquarelle private cat bond notes attached much lower down at $1.39 billion of losses to the sponsor, at that time, making them a much riskier layer of the sponsors reinsurance or retrocession tower.

At that time, the riskier Class A Aquarelle tranche of notes covered a share of losses to an exhaustion point of $1.835 billion, so occupying a share of a relatively large layer of the reinsurance or retro tower.

Now, the Class A notes have had their maturity date extended out by three months to March 20th 2024, we understand from sources.

While the larger Class B tranche of notes have been redeemed in full by investors, it appears.

As we always say, it appears the notes are being extended to allow for ongoing development of losses that qualify but are yet to reach the attachment point of the subject layer of risk.

Which allows the sponsor or cedent to retain the coverage in case its ultimate net loss, from whatever covered event is threatening, rises beyond the attachment point for these Class A private Aquarelle cat bond notes and a reinsurance recovery becomes due.

You can read all about this Artex SAC Limited – Aquarelle Notes  private cat bond transaction in our Deal Directory, which contains details of every catastrophe bond issued to-date.