A new sponsor is coming to the catastrophe bond market in St. Johns Insurance Company, a Florida and South Carolina focused homeowners carrier that is seeking $100 million of collateralized reinsurance with a Putnam Re Pte. Ltd. (Series 2021-1) transaction.
St. Johns Insurance Company is a homeowner and condominium focused property insurance company headquartered in Orlando, Florida and that is focused on underwriting in the hurricane exposed US states of Florida and South Carolina.
We’re told that St. Johns Insurance Company has elected to use Singapore as the issuance domicile for its first catastrophe bond, registering special purpose reinsurance vehicle Putnam Re Pte. Ltd. there, for this currently $100 million Series 2021-1 issuance.
Putnam Re Pte. Ltd. will look to issue a single tranche of Series 2021-1 Class A notes, that is currently sized to provide $100 million of reinsurance protection to St Johns Insurance through the sale of the notes to cat bond investors and the funds use as collateral.
The reinsurance protection that St. Johns Insurance will benefit from with this deal will provide it with indemnity and per-occurrence cover across a three-year term, against certain losses from named storms and hurricanes impacting Florida and South Carolina.
As with many cat bonds for first time sponsors that have a desire to expand their business, we understand the covered area can be expanded on reset to include additional states, should the sponsor become active there.
Sources said the $100 million of notes will attach at $300 million of qualifying losses to St. Johns Insurance and the coverage would be exhausted at $420 million in losses, after accounting for FHCF and inuring coverage, giving a little room for the deal to upsize to fill this reinsurance layer.
The currently $100 million of Series 2021-1 Class A notes that Putnam Re Pte. Ltd. will issue have an initial expected loss of 1.36% and we understand are being offered to investors with price guidance in a range from 5.5% to 6.25%.
It’s always encouraging to see another first time catastrophe bond sponsor come to market, looking to institutional capital to fill some of its reinsurance program.
St. Johns Insurance will be benefiting from use of the Singapore ILS grant scheme, effectively lowering the cost of cat bond issuance somewhat and making the coverage an even more attractive purchase.
Catastrophe bond market conditions may also help here, as recent execution has been strong and pricing keen for cat bond sponsors.