U.S. primary insurer Allstate is returning, as was expected, to the catastrophe bond market for the issuance of another tranche of notes under its Sanders Re vehicle. Sanders Re Ltd. (Series 2014-2) seeks $150m of indemnity protection for two Allstate subsidiaries.
Allstate has just completed its first 2014 catastrophe bond, the $750m Sanders Re Ltd. (Series 2014-1) which provides it with reinsurance cover for U.S. named storms excluding Florida and U.S. earthquake’s in California, New York and Washington states. When that cat bond launched it was apparent that Allstate planned to issue another tranche of notes if the deal was well received. Now that extra tranche has been launched, but not as an additional Series 2014-1 Class A tranche, rather as a single tranche of Series 2014-2 Class A notes issued by Sanders Re.
The Sanders Re 2014-2 cat bond issue is targeting $150m of fully collateralized reinsurance protection for two Florida property market focused Allstate subsidiaries, Castle Key Insurance and Castle Key Indemnity, Artemis understands. This cat bond will provide those two cedent insurers with protection for named storms, earthquakes and severe thunderstorms (so tornadoes as well) only in Florida.
The Sanders Re 2014-2 cat bond will use an indemnity trigger and protection is afforded to the ceding insurers on a per-occurrence basis over a three-year term. This is the first indemnity cat bond from Allstate, with the insurer previously preferring to use industry loss triggers for its group-wide protecting cat bonds.
The $150m of Class A notes have an initial attachment probability of 0.99% and an expected loss of 0.78%. The two ceding insurers have different attachment points, we understand, with Castle Key Insurance set at just over $41m and Castle Key Indemnity at just over $30m. Both are above and after the insurers in-force reinsurance layers. It is understood that the notes allow for a variable reset each year should the ceding insurers want to adjust the protection at all.
The $150m Sanders Re 2014-2 Class A notes are being offered to investors with price guidance of 3.5% to 4%, Artemis understands.
This cat bond is being brought to market by Aon Benfield Securities and Swiss Re Capital Markets, we understand, both acting as structuring agents and bookrunners. AIR Worldwide is providing risk modelling services.
That’s all we have on Allstate’s Sanders Re Ltd. (Series 2014-2) catastrophe bond issuance. We will update you as the deal comes to market and you can always read all about it in the Artemis Deal Directory.