France headquartered global reinsurance company SCOR has suspended the marketing of its new catastrophe bond, Atlas Capital Reinsurance 2020 DAC (Series 2020-1), citing the market disruption created by the current pandemic.
SCOR returned to the catastrophe bond market just a fortnight ago with its latest Atlas Capital transaction, as it sought to expand its capital markets backed retrocessional reinsurance.
The Atlas Capital 2020 cat bond was seeking a $200 million source of collateralised retrocessional reinsurance protection against losses from certain named storms and earthquakes for SCOR.
But the cat bond hit the market just as the financial market declines due to the ongoing Covid-19 coronavirus pandemic were really kicking in and this has led to the transaction being pulled for now, we’re told by sources.
We understand that SCOR is temporarily suspending the marketing of this Atlas Capital 2020 cat bond, citing the current Covid-19 related market disruption.
The suspension is expected to prove to just be a delay, as SCOR has said it intends to restart the marketing process for its new cat bond in the coming weeks.
We’re told SCOR remains committed to the catastrophe bond market and is said to be “eager” to restart the marketing process of this transaction as soon as it is able.
SCOR will be keen to secure the retrocession well in advance of the reinsurance renewals at the mid-year, as it will want to ensure the capacity is available in order to diversify its retro program in advance of the key mid-year renewals.
We’re told that SCOR aims to begin marketing the Atlas Capital Reinsurance 2020 DAC (Series 2020-1) catastrophe bond to investors again in around two to four weeks, by which time it hopes that market conditions may be more stable.
So the delaying of this new Atlas Capital cat bond from SCOR shows just how disruptive the impacts of current financial market volatility are to the insurance-linked securities (ILS) market.
With uncertainty heightened among capital market investors and some ILS funds facing a level of redemption enquiries at this time, ILS capacity and capital available to support new transactions is a little less guaranteed at this time.
Some of the uncertainty should be dampened if or when global financial market stability returns, or at least a sense of stability. But how long that takes right now is uncertain in itself. Two to four weeks is an aggressive timetable and shows that SCOR is keen to get this deal over the line.
As we explained last week, the fact there has been a bit of a sell-off in cat bonds, alongside some redemption requests, all means the specialist ILS and cat bond funds have been busy buying what they can and as a result fresh capital for new deals may be a little more limited.
This should resolve itself in the coming weeks, as the investors more dedicated to the ILS and cat bond sector flow more capital in to support managers needs.
But in the interim a slowing of primary cat bond issuance is one very real example of the coronavirus’ impact on the ILS market.