Marlin Re cat bond to cover HSCM-owned Weston & Southern Fidelity

A new catastrophe bond issuance is in the market that seeks to secure more than $170 million of capital markets backed named storm reinsurance for two insurance carriers that are majority owned by HSCM Bermuda, with dual-series Marlin Re Ltd. cat bonds being offered to investors.

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.

Now, in what appears a response to reinsurance market conditions, this Marlin Re Ltd. catastrophe bond issuance seeks to deliver reinsurance for those two carriers, presumably as the owners seek to optimise the cost and availability of reinsurance capacity in the hardening market.

There are two Series of notes being issued by Marlin Re Ltd., we’re told by sources, one to provide reinsurance for Weston, the other for Southern Fidelity.

Marlin Re Ltd. has been established as a Bermuda based company for the issuance of series of catastrophe bonds.

The issuer is offering a Series 2022-1 set of notes to investors to provide Weston with reinsurance and a Series 2022-2 set of notes to reinsure Southern Fidelity.

Both series will provide the beneficiary insurer with multi-year US named storm reinsurance in a fully-collateralized format from the capital markets.

We’ve separated the two, given the different sponsor or ceding company for each Series of cat bond notes being issued by Marlin Re Ltd.

First, 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.

The Series 2022-1 notes will cover named storm impacts in the states of Florida, Louisiana, Mississippi, Texas and South Carolina, we understand.

A $50 million tranche of Series 2022-1 Class A notes will provide Weston with two years of indemnity and per-occurrence cover from June, attaching at $220 million of losses, with an initial expected loss of 2.88% and they are being offered to cat bond investors with price guidance of 10.5% to 11.5%.

A $20 million tranche of Series 2022-1 Class B notes will provide Weston with one year of indemnity and per-occurrence cover from June, attaching at $140 million of losses, with an initial expected loss of 4.64%. This tranche are zero-coupon and so being offered to cat bond investors with price guidance of 85.5% to 86.5% of par (a roughly 13.5% to 14.5% coupon equivalent).

An unsized Series 2022-1 Class C tranche of notes will provide Weston with one year of indemnity and per-occurrence second and subsequent event cover from June, we understand, attaching at $25 million of losses, with an initial expected loss of 3.89%. This Class C tranche are also zero-coupon in nature and are being offered with price guidance of 80% of par, a roughly 20% coupon equivalent.

Moving on to the Marlin Re Ltd. (Series 2022-2) cat bond issuance, which will provide named storm and hurricane reinsurance protection to Southern Fidelity Insurance Company.

The Series 2022-2 notes will cover named storm impacts in the states of Florida, Louisiana, Mississippi and South Carolina, sources said.

A $60 million tranche of Series 2022-2 Class A notes will provide Southern Fidelity with two years of indemnity and per-occurrence cover from June, attaching at $250 million of losses, with an initial expected loss of 2.38% and they are being offered to cat bond investors with price guidance of 11% to 12%.

A $40 million tranche of Series 2022-2 Class B notes will provide Southern Fidelity with one year of indemnity and per-occurrence cover from June, attaching at $150 million of losses, with an initial expected loss of 4.66%. This tranche are zero-coupon and so being offered to cat bond investors with price guidance of 84% to 85% of par (a roughly 15% to 16% coupon equivalent).

An unsized Series 2022-2 Class C tranche of notes will provide Southern Fidelity with one year of indemnity and per-occurrence cover from June, we understand, attaching at $100 million of losses, with an initial expected loss of 7.56%. This Class C tranche are also zero-coupon in nature and are being offered with price guidance of 80% of par, a roughly 20% coupon equivalent.

A final also unsized Series 2022-2 Class D tranche of notes will provide Southern Fidelity with one year of indemnity and per-occurrence second and subsequent event cover from June, we understand, attaching at $25 million of losses, with an initial expected loss of 3.65%. This Class D tranche are also zero-coupon in nature and are again being offered with price guidance of 80% of par, a roughly 20% coupon equivalent.

The two series of catastrophe bond notes being issued by Marlin Re Ltd. are designed to provide broad capital markets backed catastrophe reinsurance protection to the two ceding company insurers, Weston and Southern Fidelity.

In the hardening reinsurance market and with what will be a challenging renewal approaching for Florida exposed and coastal carriers, it’s clear owner Hudson Structured (via HSCM Bermuda funds) recognises the importance of bringing diversified capital sources into the reinsurance programs of its two carriers, to realise any efficiencies available via the capital markets.

You can read all about these Marlin Re Ltd. (Series 2022-1) and Marlin Re Ltd. (Series 2022-2) catastrophe bonds and every other cat bond deal in our extensive Artemis Deal Directory.