The Residential Re 2015-1 catastrophe bond has had its maturity dates extended again, as the remaining principal of the already loss hit and partially paid out cat bond that was sponsored by USAA continues to be held in case of further reinsurance recoveries becoming possible.
U.S. primary mutual insurer USAA has been benefiting from reinsurance recoveries under its Residential Re catastrophe bond program for some months now.
The particular issuance in question is USAA’s $150 million Residential Reinsurance 2015 Limited (Series 2015-1) aggregate cat bond transaction, which has already been paying out as the insurer collects on the reinsurance protection this deal provides.
This cat bond transaction’s Class 10 notes had already seen their net principal of $50 million reduced by almost half to $26,511,039 due to a reinsurance recovery previously made in June 2019.
At the same time, the originally $100 million Class 11 tranche of the ResRe 2015-1 cat bond deal saw reductions in principal of $50 million at first in June 2019, followed by another $10 million in September, and then by another $20 million in December, as reinsurance recoveries under this layer reduces the size of the tranche left outstanding to just $20 million.
No further recoveries have been made under this ResRe 2015-1 cat bond since that time, but the remaining principal across the two tranches of notes of just over $46.5 million is still at-risk of further drawdowns due to reinsurance recoveries it seems.
USAA has elected to extend the maturity dates of the remaining just over $26.5 million of Class 10 notes and the $20 million remaining Class 11 notes to June 6th 2020, allowing further time for losses to continue developing.
The Class 10 notes are now marked down in the secondary market for bids as low as 3, suggesting investors believe they are likely to face a total loss of principal.
The Class 11 notes, meanwhile, are marked down for bids around 80, based on the remaining $20 million of principal, suggesting a further small reinsurance recovery may be made under that tranche as well.
USAA’s reinsurance recoveries under the Residential Re cat bonds has continued to increase in recent weeks.
That latest payout takes USAA’s reinsurance recoveries under the Residential Re cat bond program to at least $327.4 million at this time, probably higher as information is not always readily available on these loss payments when they are made.
It seems further loss payments could occur, as cat bond collateral continues to be held to allow for aggregate catastrophe losses to develop.
In addition, a number of at-risk tranches of Residential Re catastrophe bonds remain significantly marked down to levels that suggest more loss payments are to be expected in the months to come.