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UPC’s Armor Re II cat bond prices at low end of reduced guidance


United Insurance Holdings (UPC Insurance) is now set to achieve very efficient price execution with its latest catastrophe bond issuance, the $100 million sized Armor Re II Ltd. (Series 2018-1) which has now priced at the bottom end of already slashed guidance.

With this Armor Re II cat bond, UPC Insurance subsidiaries United Property & Casualty Insurance Co., Family Security Insurance Co., Interboro Insurance Co. and American Coastal Insurance will benefit from a two-year source of fully-collateralized reinsurance protection against losses from both U.S. named storms and earthquakes.

The transaction was launched to ILS investors in March, with a targeted size of $100 million from the single tranche of Class A notes, which will UPC with reinsurance on an indemnity trigger, per-occurrence and cascading basis.

Investor appetite for this cat bond has proved extremely strong and as seen with the majority of other deals brought to market this year the pricing has fallen.

Initially, the single $100 million tranche of Class A notes to be issued by Armor Re II Ltd., with their initial expected loss of 1.07%, were marketed to cat bond investors with coupon pricing in a range from 4% to 4.5%.

This price guidance was then slashed, as investor demand enabled the range to be lowered to 3.5% to 4%.

Now, it’s clear that investor demand has helped UPC to reduce the cost of the premium paid for its latest cat bond, with the notes now priced at the bottom end of the already reduced range, at 3.5%.

Based on the 1.07% base expected loss this cat bond will still provide investors with a multiple in the range of similar cascading transactions.

But once again this year, the fact this cat bond has been priced at a level below the initial guidance demonstrates the strong appetite and efficient reinsurance protection the catastrophe bond market can provide in 2018.

We’ll keep you updated as the Armor Re II Ltd. (Series 2018-1) catastrophe bond proceeds to market and you can read about this and every other cat bond deal in the Artemis Deal Directory.

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