France headquartered global reinsurance company SCOR has quickly relaunched its delayed Atlas Capital Reinsurance 2020 DAC (Series 2020-1) catastrophe bond transaction, bringing it back to market at a slightly smaller size of $150 million, but with pricing boosted to better compensate and attract investors.
SCOR had returned to the catastrophe bond market in mid-March with its latest Atlas Capital transaction, as it sought to expand its capital markets backed retrocessional reinsurance with a $200 million deal.
Just over a fortnight later, as the impacts of the Covid-19 coronavirus pandemic were being felt widely in capital markets and beginning to have an effect on the insurance-linked securities (ILS) market as well, the reinsurer decided to pull the cat bond deal, withdrawing the Atlas Capital 2020 cat bond issuance until capital markets settled down.
SCOR temporarily suspended the marketing of the Atlas Capital 2020 cat bond, citing the current Covid-19 related market disruption, explaining that it intended to restart the marketing process for its new cat bond in the coming weeks once capital markets were more stable.
At the time of the delaying of the Atlas 2020 cat bond deal, SCOR said it remained committed to the catastrophe bond market and would return as soon as it could.
With stability beginning to emerge across capital markets in recent days, SCOR has now returned with the same transaction but at a slightly smaller size and offering a higher coupon to investors.
The Atlas Capital 2020 cat bond had been seeking a $200 million source of collateralised retrocessional reinsurance protection against losses from certain named storms and earthquakes for SCOR, but now the initial target size has been lowered to $150 million, we understand.
Everything else about the transaction remains the same, we’re told:
Atlas Capital Reinsurance 2020 DAC will issue a single tranche of Series 2020-1 notes that will be sold to investors and the proceeds used to collateralise the underlying retro reinsurance agreements with sponsoring entity SCOR SE.
The cat bond coverage will be for certain losses from U.S., Puerto Rico, U.S. Virgin Islands and District of Columbia named storm events and U.S., Puerto Rico, U.S. Virgin Islands, District of Columbia and Canada earthquakes across a four-year term.
The retrocessional reinsurance protection will be based on an industry loss trigger and annual aggregate basis, using regionally weighted PCS reported data.
The single tranche of now $150 million of Series 2020-1 notes to be issued by Atlas Capital Reinsurance 2020 DAC have an initial attachment probability of 3.4% and an initial expected loss of 2.84%, both at the base cases.
When this cat bond deal first came to market the notes were offered with price guidance in a range from 6.75% to 7.5%.
We’re told that the returning Atlas Capital 2020 cat bond issue now comes with boosted pricing, with guidance in a range from 7.75% to 8.25%.
As we explained before, the closest recent cat bond from SCOR covering these perils for comparison on pricing was its 2016 transaction, which had an expected loss at issuance of 3% and priced with a coupon of 7.5%.
Given the pricing of the 2016 cat bond, we had suggested that this new cat bond may need to price towards the upper-end of its guidance to get away, given cat bond investors desires for higher returns at the moment.
But now, with the market disruption caused by the coronavirus evident in ILS, as it is in all investment markets, the higher pricing offered now is much more likely to enable the deal to be issued successfully at this time.
By boosting the spread guidance, SCOR is showing its commitment to the insurance-linked securities (ILS) market and its investors with this return at higher pricing and it’s likely the reinsurer will garner the necessary support to get this deal away.
It would be good for the market to see new issuance bounce back, even if it is unlikely to return to the buoyant levels of the record first-quarter of the year very quickly.
We’ll update you as this second attempt to issue the Atlas Capital Reinsurance 2020 DAC (Series 2020-1) catastrophe bond from SCOR proceeds to market and you can read about this and every other cat bond transaction in the Artemis Deal Directory.
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