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Northshore Re catastrophe bond completes, rated and lists in Bermuda


The Northshore Re Limited (Series 2013-1) catastrophe bond, which is the first cat bond to be sponsored by Bermuda based global insurance and reinsurance group AXIS Capital Holdings, has now been successfully completed, received its ratings and the notes have been listed in Bermuda.

The successful completion of the Northshore Re transaction takes 2013 cat bond issuance to $5.285 billion and issuance in the third-quarter of 2013 to $1.2 billion, according to our ILS Deal Directory, keeping the issuance run-rate on course for over $7 billion by year-end with a good chance of hitting $8 billion if conditions remain conducive for both sponsors and investors.

AXIS Capital will be delighted with the completion of Northshore Re. The transaction, which provides AXIS Capital with a multi-year source of fully-collateralized U.S. hurricane and earthquake protection on an annual aggregate and industry loss trigger basis, both grew in size and saw its pricing drop while the cat bond was marketing.

Northshore Re launched as a $150m cat bond with notes offering investors an interest spread in the range of 7.5% to 8.5%. By the time it closed, the size of the deal had increased by 33% to $200m and the pricing had dropped by over 9% to below the guidance range, settling at 7.25%. For AXIS Capital that means cheaper coverage and more of it, a positive result for a first-time cat bond sponsor.

The single tranche of $200m of Class A notes issued by Northshore Re provide AXIS Capital with a source or retrocessional reinsurance protection against catastrophe events identified by PCS as including hurricanes or earthquakes, on an industry loss basis, between an attachment point of $1 billion and an exhaustion point of $1.2 billion above the deals franchise deductible of $50 million.

The actual loss figures will be based on industry loss estimates reported by PCS scaled by state using factors roughly proportional to AXIS’ market share and state weighting factors.

Standard & Poor’s has assigned its ‘BB-(sf)’ rating to the $200m Series 2013-1 Class A notes issued by Northshore Re Ltd.

The Bermuda Stock Exchange (BSX) has admitted the Northshore Re Ltd. principal at risk variable rate note program and the single tranche of Class A notes to its official list. The listing sponsor was Capital G/BSX Services Limited.

As we wrote earlier today, AXIS Capital Holdings has taken advantage of reduced pricing and third-party reinsurance capital to secure a greater level of retrocessional coverage for its reinsurance program in 2013. That will please the company and its investors, putting it in good shape for the rest of the year should any catastrophe events threaten losses.

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