Artemis has learned that the Marlin Re Ltd. catastrophe bonds being issued for two insurance carriers that are majority owned by HSCM Bermuda are not going to be fully issued, with the cat bond for Weston continuing, but the one for insurer Southern Fidelity now pulled.
When these two series of cat bonds were launched to the market back in May, they were seeking at least $170 million of capital markets backed named storm reinsurance across the two insurers.
In the second-half of 2020, insurance-linked securities (ILS), reinsurance and transportation investment manager Hudson Structured Capital Management (investing as HSCM Bermuda), took majority and sole stakes in Weston Property and Casualty Insurance and Southern Fidelity Insurance Company, two carriers with Florida and coastal US property focuses.
Marlin Re Ltd. has been established as a Bermuda based company for the issuance of series of catastrophe bonds and two Series of notes were being issued by the company, one to provide reinsurance for Weston, the other for Southern Fidelity.
However, the Southern Fidelity notes will no longer be issued, we’re told, which is likely linked to the insurer having halted its Florida operations as it waits to secure its reinsurance, with the cat bond not looking likely to be part of the arrangements any more.
So just the Marlin Re Ltd. (Series 2022-1) cat bond issuance, which will provide named storm and hurricane reinsurance protection to Weston Property and Casualty Insurance Company, remains in the market we understand.
This issuance had featured three tranches of notes, but we understand only the Class A notes survive.
The Marlin Re 2022-1 Class A notes will cover Weston against named storm impacts in the states of Florida, Louisiana, Mississippi, Texas and South Carolina across a two year term on an indemnity and per-occurrence basis, from June 8th.
This tranche of notes is now sized at $45 million, we understand from sources, while the price guidance has now been elevated.
Attaching at $220 million of losses, with an initial expected loss of 2.88%, the Marlin Re 2022-1 Class A notes were first offered to cat bond investors with price guidance of 10.5% to 11.5%.
We’re now told that pricing has risen significantly to between 15% and 16%.
In the hardening reinsurance market and through this challenging renewal for Florida exposed and coastal carriers, it’s clear owner Hudson Structured (via HSCM Bermuda funds) recognised the importance of bringing diversified capital sources into the reinsurance programs of its two carriers, to realise any efficiencies available via the capital markets.
The situation at Southern Fidelity has clearly made that untenable this time, but it’s good to see the Weston focused Marlin Re catastrophe bond will still come to market.