The first catastrophe bond to be sponsored by AXIS Capital Holdings Limited, the Bermuda based global insurance and reinsurance group, has become the latest to see its pricing drop to the lowest end of an already reduced guidance range. The Northshore Re Limited (Series 2013-1) cat bond will offer investors a coupon of 7.25%.
Earlier this week we wrote that the price guidance for Northshore Re had been reduced to below the original range the book began being marketed at. Now, following a trend seen by many cat bonds in 2013 the pricing was finalised at the bottom end of that reduced range, saving AXIS Capital money on the premiums it will pay for this layer of its reinsurance program.
The Northshore Re catastrophe bond will provide AXIS Capital with a source of fully-collateralized reinsurance protection over a three-year period for U.S. hurricanes and earthquakes on an annual aggregate basis using a state-weighted PCS industry loss index.
The deal launched with a preliminary size of $150m but demand saw that increase by 33% to now offer $200m of protection to AXIS. The coupon pricing on the notes began with a guide range of 7.5% to 8.5%, a range which then tightened to 7.25% to 7.5% as investors accepted a lower price to subscribe to the deal.
Finally, the Northshore Re cat bond priced at the lowest end of the already reduced guidance at a coupon of 7.25%. That’s a reduction in the price that AXIS Capital will pay over the term of the cat bond in interest to investors of approximately -9.4% from the mid-point of the original price guidance.
AXIS Capital will be delighted with the success of its first visit to the insurance-linked securities market as a catastrophe bond sponsor. It has increased the cover this layer of its reinsurance will provide by 33% and saved over 9% on the premium payments. A good result in any sponsors book.
The Northshore Re cat bond will fully complete next week, at which point the addition of its $200m of risk capital to 2013 cat bond issuance will take the total for the year to just under $5.3 billion and the total for cat bond issuance in the third-quarter to $1.2 billion already.