Avatar’s new Casablanca Re cat bond sees 16%-18% price hike

Guide pricing for Avatar Property and Casualty Insurance Company’s new $65 million Casablanca Re Pte. Ltd. (Series 2020-1) catastrophe bond issuance has been hiked by 16%-18%, as insurance-linked securities (ILS) investors continue to demonstrate their requirement for higher returns and cat bond rates reflect the hardening Florida reinsurance market.

We’re told the catastrophe bond now has completely new coupon guidance, with the bottom-end of the updated ranges now being higher than the top-end of the range the deal launched to investors with.

ILS funds and investors are making clear their demands for higher returns and cat bond coupons are moving higher in-line with reinsurance rates at this mid-year renewal season.

The Casablanca Re Pte. Ltd. (Series 2020-1) catastrophe bond was launched at $65 million in size last month, to provide at least a partial renewal of the insurer’s soon to mature $100 million Casablanca Re Ltd. (Series 2017-1) transaction.

This is Avatar’s second cat bond issuance and its first to be domiciled in Singapore.

Casablanca Re Pte. Ltd. will seek to issue two tranches of Series 2020-1 notes, to provide Avatar with indemnity reinsurance protection, on a cascading and per-occurrence basis, against losses from Florida named storms (so tropical storms and hurricanes), to begin, the covered area could be expanded at future resets, across a three-year term.

The Series 2020-1 Class A tranche of notes to be issued by Casablanca Re Pte. still target $40 million of coverage and have an initial expected loss of 1.12%. These notes were initially marketed to investors with coupon price guidance of 6% to 6.5%. We’re now told that the price guidance for the Class A notes has been lifted to 7% to 7.5%, around a 16% increase in pricing at the mid-point.

The Class B tranche of notes are still sized at $25 million and have an initial expected loss of 2.35%. This tranche were first offered to cat bond investors with price guidance in a range from 8% to 8.5%. We now understand that the guidance for this tranche has been raised by around 18% at the mid-point, with the new range being 9.5% to 10%.

At these elevated pricing levels the new Casablanca Re cat bond will provide much higher multiples to investors than Avatar’s maturing cat bond did.

We’ll update you as this new Casablanca Re Pte. Ltd. (Series 2020-1) catastrophe bond from Avatar Property and Casualty Insurance comes to market and you can read about every cat bond transaction in the extensive Artemis Deal Directory.