U.S. primary mutual insurer USAA has benefited from another almost $48.8 million of reinsurance recoveries under two of its outstanding and extended Residential Re catastrophe bonds, while also releasing a significant chunk of retained collateral back to investors as well.
USAA has made a number of reinsurance recoveries under its catastrophe bond backed reinsurance protection from the capital markets, as losses from consecutive years have triggered a number of tranches of its Residential Re series of deals, resulting in loss payments being due to the sponsor.
As USAA’s qualifying aggregate losses from catastrophe events through 2017 and 2018 have risen, a number of its catastrophe bonds have come into play and the insurer has benefited from their reinsurance protection.
Most recently, earlier this week we reported that USAA had made a a second reinsurance recovery from its Espada Reinsurance Limited (Series 2016-1) catastrophe bond, amounting to $2.97 million.
Back in February this year we reported the last recoveries under the ResRe series when USAA added another just over $57.4 million to the reinsurance recoveries made under its Residential Re catastrophe bond program.
Of the loss payments we know of, reinsurance recoveries under the Residential Re cat bond program have come to at least $327.4 million as of Q1 2020, which rises to at least $332.6 million if you add in the Espada Re cat bond loss payments as well.
Now, we’ve learned that USAA recently secured a further almost $48.8 million of reinsurance recoveries from the Residential Re series, lifting the total recoveries to around $381.4 million, that we are aware of so far.
In this latest series of loss payments, first is USAA’s Residential Reinsurance 2015 Limited (Series 2015-1) aggregate cat bond transaction.
USAA is receiving just over $26.5 million in way of a further loss payment under the reinsurance agreement for the Class 10 tranche of notes of this catastrophe bond, which reduces the principal of this tranche now to zero as it had already paid out a similar amount before and is now exhausted.
At the same time, USAA has received a further $446,279 loss payment from the less risky Class 11 tranche of the ResRe 2015-1 catastrophe bond, reducing their outstanding principal to just over $19.55 million.
Both the Residential Re 2015-1 Class 10 and Class 11 cat bond tranches have now had their remaining notes principal maturity extended through to September 6th 2020.
Second is USAA’s Residential Reinsurance 2016 Limited (Series 2016-1) cat bond,
USAA has now received a loss payment of just under $21.5 million from the Class 10 tranche of notes from this ResRe 2016-1 cat bond, reducing the remaining principal down to zero as this layer fully pays out its reinsurance coverage. This tranche had already seen a reduction in principal of the same amount previously.
Meanwhile, the Residential Re 2016-1 Class 11 tranche of cat bond notes have now paid out $334,710 to USAA, reducing their remaining principal to almost $74.67 million.
But the outlook for this tranche of notes had clearly improved, as USAA has opted to return $60 million of the collateral remaining from the ResRe 2016-1 Class 11 tranche to investors as a return of collateral, so now there is just under $14.67 million left retained at this time.
Both the Residential Re 2016-1 Class 10 and Class 11 cat bond tranches have now had their remaining notes principal maturity extended three months as well, through to September 6th 2020.
So these loss payments see USAA gaining a further roughly $48.8 million of reinsurance recoveries under its Residential Re catastrophe bond program.
With collateral still held on a number of the ResRe cat bond series though, it seems investors are not yet free from potential further losses on these cat bonds, should USAA’s ultimate from prior year catastrophes continue to adversely develop.