Swiss Re Insurance-Linked Fund Management

Xactanalysis Insights and PCS

Residential Re 2013 launches, USAA’s first catastrophe bond of the year


U.S. primary insurer USAA, the most prolific of catastrophe bond sponsors in the primary insurer category, has launched its 20th cat bond transaction today according to sources. Residential Reinsurance 2013 Ltd. (Series 2013-1) is the 20th entry of a USAA sponsored cat bond in our Deal Directory. In total the previous 19 deals add up to a huge $5.19 billion of risk transferred to the capital markets in cat bond form.

This Residential Re 2013 deal is USAA’s first trip to the cat bond market in 2013. It has issued a cat bond around the end of May or beginning of June each year since 1997, a very consistent record. In recent years it has also issued a cat bond in November or December as well, having done so since 2010.

This makes USAA one of the most consistent issuers of catastrophe bonds in our Deal Directory and the most prolific primary insurer sponsor since the cat bond market began.

We’re told that this transaction has just launched today and as such we don’t have a great deal of information for you right now, we will bring you more as it becomes available.

Residential Reinsurance 2013 Limited is a Cayman Islands domiciled vehicle established by USAA to issue cat bond notes. In this first issuance, two tranches of Series 2013-1 notes will be issued and sold, one a Class 3 and one Class 11, to collateralize multi-peril reinsurance agreements for the sponsor. The risk period that this cat bond will provide cover for is said to be four years.

We understand that the deal has a preliminary size of $250m, with the Class 3 notes sized at $95m and the Class 11 tranche sized at $155m. Investor side sources we have spoken with suggest the size of this deal will likely grow and there is some speculation as to whether USAA will take advantage of recent cat bond pricing to grow this deal significantly given its track record and liking for cat bond protection.

Residential Re 2013 will provide USAA with cover for the U.S. perils of hurricane & tropical storm, earthquake, severe thunderstorm, winter storm and wildfires in California. As with all of its recent cat bonds the deal uses an indemnity trigger, with the Class 3 notes providing per-occurrence protection and the Class 11 notes providing annual aggregate protection.

The deal is being brought to market with the support of Goldman Sachs, Swiss Re Capital Markets and Deutsche Bank Securities and with risk modelling from AIR Worldwide we understand.

That’s all we have on this cat bond for the moment. We will follow-up with more information on Residential Reinsurance 2013 Ltd. (Series 2013-1) when it becomes available. The transaction has been added to our Deal Directory and we will keep that entry updated as information becomes available.

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