American Coastal prices upsized Armor Re II Florida wind cat bond within guidance
In another move that demonstrates catastrophe bond investors are not softening price across every opportunity, American Coastal Insurance Company has now successfully secured the upsized $200 million Armor Re II Ltd. (Series 2024-1) Florida named storm cat bond, but with the risk spread finalised within the initial range of price guidance.
At a time when catastrophe bond pricing has softened and the cat bond market’s yield has reduced, although still remaining at a historically elevated level, it is encouraging to see investors still enforcing minimum return requirements for different opportunities.
American Coastal ventured back to the catastrophe bond market in March with a target to secure at least $150 million in Florida named storm reinsurance protection from this new Armor Re II 2024-1 cat bond issuance.
As we later reported, the reception from investors was positive and American Coastal then aimed to upsize its new cat bond to provide one-third more in collateralized reinsurance, with the target size lifted to $200 million.
We’re now told that uplifted size has been achieved and the notes have now been priced, to secure that $200 million of Florida wind reinsurance for American Coastal.
As a result, Bermuda based special purpose insurer Armor Re II Ltd. will issue a single $200 million tranche of Series 2024-1 Class A notes, to provide American Coastal with a three-year source of Florida named storm and hurricane reinsurance protection, running to the end of April 2027.
The reinsurance protection from the notes is structured on an indemnity trigger and per-occurrence basis over the three-year risk period, with their coverage attaching at $275 million and exhausting at $575 million of losses to the sponsor.
The now confirmed to be $200 million of Class A notes that Armor Re II Ltd. will issue come with an initial attachment probability of 1.38%, an initial expected loss of 0.89% and were first offered to cat bond investors with spread price guidance in a range from 10% to 11%.
We later reported that the price guidance was updated to pay investors a spread of 10.25%, so within the initial guidance although towards the lower-end of it.
Which is now where we are told the notes were finally priced, to secure American Coastal the upsized $200 million of reinsurance, at pricing below the initial mid-point, but encouragingly for market-wide pricing within the initial guidance range.
There is definitely an element here of initial price guidance becoming more realistically set for some catastrophe bonds of late, as the market, its sponsors and the broker-dealers adjust expectations to meet investors risk appetites and willingness to invest at certain risk spread levels.
Which is also why price changes are useful indicators of investor appetite, but also as they become more realistically set not just a sign of investor discipline, but also of the market and its participants aligning with the reality of investor appetites as well.
It’s still a strong result for American Coastal, securing more reinsurance than originally targeted at pricing that falls in the lower-end of initial guidance.
You can read all about this new Armor Re II Ltd. (Series 2024-1) catastrophe bond transaction and every other cat bond ever issued in our Artemis Deal Directory.
