Bermuda based provider of global specialty insurance and reinsurance products, AXIS Capital Holdings Ltd., is sponsoring what we believe to be its first catastrophe bond transaction with the launch of the latest deal to hit the market, Northshore Re Limited (Series 2013-1).
Northshore Re Limited is a Bermuda domiciled special purpose insurer which was added to the Bermuda register on the 24th of June. We understand that Northshore Re has been set up as a program and in this first issuance will place a single tranche of cat bond notes with investors to provide AXIS Capital subsidiary companies with a source of collateralized, capital market backed reinsurance protection.
We’re told that the transaction will ultimately protect a range of AXIS Capital subsidiaries, including (but not limited to) AXIS Specialty, AXIS Reinsurance, AXIS Insurance and AXIS Surplus. The Northshore Re cat bond will protect these AXIS Capital subsidiaries with a multi-year source of U.S. hurricane and earthquake reinsurance.
Currently the deal is being marketed offering a single tranche of Series 2013-1 Class A notes with a deal size of $150m, as with any cat bond that is a preliminary size and could grow. The cover provided to AXIS by the Northshore Re catastrophe bond will be on an annual aggregate basis using a PCS industry loss index which we understand will be state-weighted.
With this cat bond AXIS is looking for three years of protection. The hurricane protection is for the usual U.S. wind exposed states from the Gulf Coast round to the northeast. Earthquake coverage is for the entire U.S.
We’re told that the Northshore Re cat bond will provide its protection from an attachment point of $1 billion to an exhaustion point of $1.2 billion and that qualifying catastrophe events will only accumulate aggregate losses after a deductible of $50m is cleared. The attachment probability works out at 2.43% and the expected loss at 2.07%. Pricing wise sources explained that the deal is offered at a range of 7.5% to 8.5%.
Aon Benfield Securities is structuring this Northshore Re Ltd. cat bond and also acting as bookrunner. AIR Worldwide are providing risk modelling.
It’s encouraging to see another new sponsor added to our Deal Directory in 2013. By accessing the capital markets AXIS Capital will benefit from a new source of capital, aiding the diversification of its reinsurance program as well as a multi-year source of protection at a time when catastrophe bond pricing is very attractive.
That’s all the information we’ve been able to source so far. We’ll update you, and hope to bring you more details, as this latest catastrophe bond to hit the market, Northshore Re Limited (Series 2013-1), moves towards completion.