Vantage secures $225m Vista Re cat bond with 10% drop in price

Vantage Risk has now secured its first catastrophe bond at the upsized $225 million target, an increase of 50%, while the pricing for its Vista Re Ltd. (Series 2021-1) cat bond issuance has now been fixed 10% below the mid-point of initial coupon guidance.

The issuance of Vantage Risk’s first Vista Re 2021-1 catastrophe bond is just the latest this year to experience strong execution, as investor demand for new cat bond notes helped the company significantly increase the reinsurance coverage the cat bond will provide, while securing the coverage at keen pricing.

Vantage Risk, the insurance and reinsurance start-up launched by industry veterans Greg Hendrick and Dinos Iordanou, entered the catastrophe bond market for the first time roughly a fortnight ago, as Artemis was first to report.

At the time, Vantage was looking to secure at least $150 million of North American multi-peril collateralized retrocessional reinsurance from its first trip to the cat bond market.

The issuance increased in size by 50%, with the target moving up to $225 million of reinsurance protection for Vantage Risk.

That upsized amount was finally secured, as our sources said this morning that the deal has now been priced to offer cat bond investors $225 million of notes.

At the same time, the pricing of the notes has fallen and settled at the low-end of an already revised and lowered range, we’re told.

When the issuance is completed, we understand on May 4th, Vista Re Ltd. will issue a single $225 million tranche of Class A Series 2021-1 notes, that will be sold to ILS and cat bond investors and the proceeds used to fully-collateralize an underlying retro reinsurance agreement between Vista Re Ltd. and Vantage Risk Ltd.

The $225 million of reinsurance protection this provides will protect Vantage Risk against certain losses from North American named storms and earthquakes, across the United States, Puerto Rico, U.S. Virgin Islands, D.C. for named storms and also across Canada for earthquakes.

The reinsurance protection will be on an industry loss trigger basis, which is state weighted and calculated over annual risk periods to provide aggregate coverage, with PCS as the reporting agency in the case of all perils, across a three-year term.

A $15 million franchise deductible applies for every qualifying catastrophe event, while the notes will initially attach at $200 million of losses.

The $225 million upsized Series 2021-1 Class A tranche of notes to be issued by Vista Re Ltd. have an initial expected loss of 3.32%.

They were first offered to cat bond funds and investors with price guidance in a range from 7.25% to 7.75%, but that guidance was lowered to 6.75% to 7.25% and we’re now told the coupon was finally fixed when the notes priced to offer investors a 6.75% interest spread.

That represents a price drop of 10%, from the initial mid-point of guidance and means the notes have priced offering investors a multiple at market of just 2.03 times the expected loss.

Vantage’s first cat bond follows in the footsteps of the majority of transactions issued so far in 2021, with multiples at market now declining to levels last seen in 2018/19, according to Artemis’ data.

There is a growing chance that the recent sharp decline in cat bond pricing seen through early 2021 could weigh on traditional reinsurance pricing for equivalent property catastrophe reinsurance risks at upcoming renewals, we believe.

Vantage Risk will be delighted with the execution of its first ever catastrophe bond and it’s no surprise the company opted to upsize the deal as a result of strong investor demand.

You can read all about the Vista Re Ltd. (Series 2021-1) catastrophe bond in our extensive Artemis Deal Directory.