U.S. primary mutual insurer USAA has made a second reinsurance recovery from its Espada Reinsurance Limited (Series 2016-1) catastrophe bond transaction and has released more of the outstanding principal back to investors as well.
USAA sponsored the Espada Re catastrophe bond in 2016, securing $50 million of multi-peril U.S. catastrophe reinsurance protection from the transaction on an annual aggregate basis.
The coverage was across four-years, with the risk period beginning in June each time and the transaction was one of those exposed to losses due to the numerous losses that USAA suffered over the course of 2017 into 2018, we understand.
As USAA’s qualifying aggregate losses from catastrophe events through 2017 and 2018 rose, the Espada Re cat bond was among the transactions that became viewed as at-risk of triggering.
Then, a year ago, the news emerged and we reported that USAA had its $50 million of original principal reduced to $47,794,184, a roughly 4.5% reduction in the amount of notes left outstanding.
We assumed that this was a reinsurance recovery being made under the terms of the Espada Reinsurance cat bond, but the deal was still on-risk through to June 2020.
Now, we understand from sources that USAA has received a reinsurance recovery loss payment of almost $2.97 million from the remaining Espada Re cat bond principal, as a result of which the remaining principal was reduced further to $44,823,653 this month.
At the same time, USAA has agreed to release $35 million of the remaining collateral to investors in the Espada Re cat bond notes, we’re told.
That leaves some $9,823,653 of the original principal left outstanding and we understand that these remaining notes have now had their maturity dates extended by three months, until September 6th 2020.
USAA has been able to make a number of reinsurance recoveries under its Residential Re catastrophe bonds as well.
Most recently we reported in February that, USAA had added another just over $57.4 million to the reinsurance recoveries made under its Residential Re catastrophe bond program.
That latest payout took USAA’s reinsurance recoveries under the Residential Re cat bond program to at least $327.4 million at this time, possibly higher as information is not always readily available on these loss payments when they are made.
Add to that the now almost $5.2 million recovered through loss payments under its Espada Re cat bond as well, meaning the total has risen to at least $332.6 million.