American Integrity cat bonds marked down further as hurricane Ian loss rises again

Two more outstanding catastrophe bonds that are exposed to potential losses from hurricane Ian have been marked down further on secondary pricing sheets, as US primary insurer American Integrity has increased its estimate for the storm, Artemis has learned.

We last reported on the Integrity Re catastrophe bonds back in January 2024, when the outlook deteriorated for them after American Integrity released an updated estimate for ultimate net losses from hurricane Ian in December.

Once again, an update has been given, with the quantum of losses expected from the hurricane having risen again, further demonstrating the risk of loss creep from prior year events.

As we reported earlier this week, the Hestia Re Ltd. (Series 2022-1) catastrophe bond sponsored by Kin Insurance had been marked down and its sponsor had cited new litigation tactics in Florida as a driver of rising claims amounts.

It’s not clear the reason for American Integrity’s rising estimate of losses, but it is possible the company has experienced similar loss creep driven by the claims environment in Florida still not being fully rectified by the property insurance reforms that had been enacted in the state.

Back to American Integrity’s cat bonds and the two partially marked down issues by Integrity Re Ltd. have now been marked down further, as the UNL reported by the sponsor has risen, we are told.

Recall that, already the most at-risk cat bond sponsored by American Integrity, the $150 million Integrity Re II Pte. Ltd. (Series 2020-1) issuance, had been marked down and the market still anticipates a total loss for these notes.

Meanwhile, the $50 million Integrity Re Ltd. (Series 2019-1)  Class A issuance had been marked down to around bids of 50 back in January, then to bids of around 20 last month, but now we’re told this tranche has seen its price reduced further, with some sheets now marking them almost to zero, implying another case where the market feels a total loss of principal is possible.

Lastly, the $75 million Integrity Re Ltd. (Series 2022-1) cat bond notes had been marked down for bids as low as 80 back in January, but by August this was as low as bids of 50 and now after the estimate was updated by the sponsor we’re told some pricing sheets have them marked as low as for bids of 10 to 20 cents on the dollar.

We’re told there remains some uncertainty and that pricing sheets seem to be marking the notes more aggressively than the latest UNL estimate from American Integrity implies, which suggests additional loss creep is thought likely by the cat bond market.

American Integrity had previously opted to extend the maturity dates for the two Integrity Re cat bonds right out to 2028, meaning there may be some time left until final losses are understood, meaning the cat bond backed reinsurance protection remains available to the sponsor as its hurricane Ian loss is finalised.

Details of catastrophe bonds facing losses, deemed at risk, or already paid out, can be found in our cat bond losses Deal Directory here.