GC Securities has confirmed the placement of Series 2015-1 Class A Principal At-Risk Variable Rate Notes, due 6 July 2018, with notional principal of $300 million through a newly formed catastrophe bond shelf programme, Cranberry Re.
The programme has been put in place to benefit the Massachusetts Property Insurance Underwriting Association (MPIUA).
This is the second time that MPIUA has used the catastrophe bond market to manage its natural peril risks and is the first catastrophe bond benefiting a residual market insurer to protect against multiple natural perils. MPIUA previously accessed the catastrophe bond market in 2010.
The Series 2015-1 Notes are positioned alongside MPIUA’s traditional reinsurance programme to provide annual aggregate protection from tropical cyclones, tropical storms, hurricanes, severe thunderstorms and winter storms causing at least $10 million in losses to MPIUA.
The bonds also provide three years of risk transfer protection, and attach when MPIUA’s annual aggregate losses exceed $300 million, and exhaust when MPIUA’s annual aggregate losses exceed $1.4 billion.
GC Securities served as sole structurer and bookrunner, while Hannover Rück SE served as the transformer reinsurer facilitating MPIUA’s access to catastrophe bond-based risk transfer capacity.
Cory Anger, global head of ILS structuring at GC Securities, commented: “We are honoured to have brought MPIUA back to the catastrophe bond market and utilised catastrophe bond capacity to achieve MPIUA’s stated goals as MPIUA changed its reinsurance program to an annual aggregate structure.”
“The Series 2015-1 bonds (as well as the Cranberry Re shelf programme) provide the novel structural features to MPIUA, including the flexibility in how MPIUA can annually reset the layer and liquidity features that advance expected next 30 days’ worth of claims.
Anger continued: “As the first multi-peril residual market insurer catastrophe bond, MPIUA also did not have to utilise third party identification sources for identifying severe thunderstorms or winter storms.”
“Instead, investors accepted MPIUA’s catastrophe code strategy, thereby removing a source of expense and complexity and bringing catastrophe bonds closer to traditional reinsurance structures.”
