The Bowline Re Ltd. (Series 2019-1) catastrophe bond transaction from Transatlantic Holdings, the parent to Transatlantic Reinsurance (or TransRe), has now increased in size at pricing, reaching $250 million.
That’s a $50 million increase during the marketing period for this catastrophe bond, helping TransRe to an enlarged slice of capital market’s backed and fully-collateralized retrocessional reinsurance.
TransRe’s latest catastrophe bond transaction was launched to the market in February, but at the time was only targeting a $200 million source of collateralized reinsurance for the carrier.
As we explained earlier today, the target grew to $225 million to $275 million, as TransRe looked to secure more coverage from the capital market with this latest cat bond deal.
Now it has reached pricing and in terms of size been fixed at $250 million, we’re told. While at the same time the pricing was fixed at the initial mid-point of guidance for the lower risk tranche of notes and slightly above the mid-point of guidance for the higher risk tranche.
The movement in pricing continues to provide encouraging signals that cat bond and ILS investors and ILS fund managers are pushing to be compensated with higher rates following two years of catastrophe losses and that ceding companies and cat bond sponsors are responding positively to this.
This Bowline Re Ltd. (Series 2019-1) catastrophe bond will expand TransRe’s capital market’s backed retrocessional reinsurance protection for its portfolio of property catastrophe risks across a range of subsidiaries.
TransRe and its subsidiaries will benefit from a four-year source of annual aggregate retrocessional reinsurance protection on an industry loss trigger basis, across four individual risk periods, covering it on an annual aggregate basis against losses from named storms, earthquakes and severe thunderstorms affecting the United States, Canada, Puerto Rico, the U.S. Virgin Islands and District of Colombia.
At launch, the Bowline Re Ltd. catastrophe bond issue featured two tranches of notes, sized at $100 million each.
At pricing today, the cat bond grew to $250 million in size.
The Class A tranche, which is the lower risk layer of notes with an initial expected loss of 1.36%, remained at $100 million in size. At launch this tranche was offered to investors with price guidance in a range from 4.5% to 5% and now the notes have been priced with a 4.75% coupon.
The Class B higher risk tranche, which has an initial expected loss of 3.69%, grew to $150 million in size, we’re told. These notes were offered to investors with price guidance in a range from 8% to 8.75%, but at pricing the coupon was fixed at 8.5%.
The fact it is the higher risk tranche that grew suggests cat bond investor demand for higher returning investment opportunities remains high right now, as they look to boost cat bond fund and portfolio returns.
Once this $250 million Bowline Re 2019-1 catastrophe bond is launched next week TransRe will have $500 million of retrocessional reinsurance protection from its two catastrophe bonds, propelling it further up our cat bond sponsors leaderboard.