Swiss Re Insurance-Linked Fund Management

Original Risk: A Society for Change Agents

USAA’s Residential Re 2014-2 cat bond prices just below mid-point


U.S. primary insurer USAA’s Residential Reinsurance 2014 Ltd. (Series 2014-2) catastrophe bond transaction has now been priced, with sources telling us that the coupon has been set at 4.8% which is just slightly below the mid-point of initial guidance.

The transaction sees Residential Reinsurance 2014 Ltd. issuing a single Class 4 tranche of $100m of notes to provide USAA with a source of reinsurance protection on an indemnity trigger and per-occurrence basis and with a four-year term to December 2018. The underlying covered perils are certain of USAA’s U.S. tropical storm, earthquake, severe thunderstorm, winter storm, wildfire, volcanic eruption and meteorite impact exposures.

The $100m of Residential Re 2014-2 notes launched to investors with a coupon guide range of 4.5% to 5.25%, which was subsequently narrowed to 4.75% to 5% towards the mid-point of the initial range.

We understand that final pricing sees the Residential Re 2014-2 notes set to pay investors a coupon of 4.8% above the yield of the collateral investments. At this leave, with an expected loss of 1.61%, the deals multiple will be 2.98X.

This catastrophe bond is scheduled to reach settlement in the first week of December. We will update you once it has completed. You can read all about Residential Reinsurance 2014 Ltd. (Series 2014-2) in our cat bond Deal Directory.

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