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Riverfront Re 2017-1 cat bond launched for Great American Insurance


Great American Insurance Group is seeking to renew, extend and double in size its catastrophe bond backed reinsurance coverage, with the launch of a $190 million Riverfront Re Ltd. (Series 2017-1) transaction that covers more perils and is twice the size of its 2014 cat bond.

The Riverfront Re 2017-1 cat bond will provide capital markets backed multi-peril reinsurance coverage to Great American Insurance and its affiliates, including American Empire Surplus Lines, National Interstate Insurance, Mid-Continent Casualty Co. and its Neon branded Syndicate 2468 at Lloyd’s of London, we understand.

The insurers first cat bond, Riverfront Re Ltd. (Series 2014-1) which matured at the end of 2016, was just $95 million in size and covered Great American and subsidiaries for losses from U.S. and Canada named storms, earthquakes, severe thunderstorms and winter storms.

The new Riverfront Re 2017-1 cat bond is twice the size at $190 million and sees the peril coverage expanded so that Great American will benefit from fully collateralized reinsurance protection for losses due to U.S. and Canada named storms, earthquakes, severe thunderstorms, winter storms, wildfires, meteorite impact and volcanic eruption.

So this cat bond renewal not only increases the amount of protection but also broadens it considerably for Great American Insurance Group.

This 2017-1 issuance will see Riverfront Re Ltd. issuing two classes of notes which will be sold to investors to provide a source of indemnity based reinsurance coverage, with both per-occurrence and annual aggregate triggers for each tranche, however the main contributor to expected loss is per-occurrence losses, we’re told.

The reinsurance protection provided will run for three and a half years, to the end of 2020, so will cover four named storm seasons for Great American.

A $142.5 million Class A tranche of notes will cover 95% of losses from an attachment point of $150m, so have an initial attachment probability of 1.88%, an expected loss of 1.08% and are offered to investors with price guidance in a range from 4% to 4.5%.

A $47.5m Class B tranche will cover 95% of losses from an attachment at $100m, with an initial attachment probability of 3.72%, an expected loss of 2.63% and are offered with coupon guidance of 6.25% to 7%.

The Riverfront Re 2017-1 transaction will be completed by the end of May, in time for the June 1st reinsurance renewal and as named storm risks make up the majority of this cat bonds expected loss the start of the 2017 hurricane season.

We’ll update you as this cat bond comes to market. You can read all about this Riverfront Re Ltd. (Series 2017-1) transaction in the Artemis catastrophe bond Deal Directory.

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