The new Easton Re Pte. Ltd. (Series 2020-1) catastrophe bond transaction that is being sponsored by Hamilton, the Bermuda based insurance and reinsurance holding company, has seen its coupon price guidance dropped during the marketing phase of the issuance, as investors once again demonstrate their appetite for risk from respected sponsors.
This catastrophe bond is the first full 144a transaction to be sponsored by Hamilton, but investors have clearly shown they are comfortable with the firm as a recipient of cat bond coverage, as the price guidance fell by almost 11% at the mid-point of guidance.
The size of the issuance hasn’t changed though and Hamilton continues to seek a $150 million source of retrocessional reinsurance with this Singapore domiciled Easton Re Pte cat bond issuance.
As we explained at the start of December, Hamilton was expected to enter the 144a catastrophe bond market with a first full cat bond deal that would be issued out of Singapore.
Further details of the issuance then became available, as it became clear that Hamilton was looking for a three-year , $150 million source of U.S. named storm and U.S. earthquake retrocessional reinsurance using the recently incorporated Easton Re Pte. Ltd. special purpose reinsurance vehicle domiciled in Singapore.
Easton Re Pte. is still targeting issuance of a $150 million tranche of Series 2020-1 Class A notes, the size hasn’t changed.
The notes will be offered and sold to cat bond investors, with the proceeds used to collateralize retrocessional reinsurance agreements between the issuance vehicle and a range of Hamilton’s subsidiaries, including its reinsurer Hamilton Re and Lloyd’s managing agent.
The $150 million of reinsurance coverage will be for certain losses from U.S. named storms (inc. Puerto Rico, US Virgin Islands, DC) and U.S. earthquakes (inc. DC), across three years, on a state weighted industry loss trigger and per-occurrence basis.
The notes issued by Easton Re Pte. have an initial expected loss of 1.48% at the base case, and at first the coupon price guidance of the offering was in a range from 4.5% to 5%.
Now, though, we’re told that investor appetite for the Easton Re cat bond deal means the pricing is likely to drop and as a result the guidance range has been lowered to 4% to 4.5%.
Meaning this could become another recent catastrophe bond to price at the bottom of, or even below, initial guidance. A trend that has emerged in recent weeks, as respected cat bond sponsors have found their transactions pricing at particularly keen levels, given the overall trends in reinsurance pricing.
We’ll update you once final pricing information is available.