Pricing elevated for Nephila syndicate 2357’s Atela Re catastrophe bond
Artemis understands that the price guidance has been updated at elevated levels for both tranches of the Atela Re Ltd. (Series 2024-1) catastrophe bond that is being sponsored by Nephila Capital to provide retrocession for its flagship Lloyd’s syndicate 2357.
This is the first catastrophe bond directly sponsored by an entity of Nephila Capital, the insurance-linked securities (ILS) investment manager owned by Markel, and also the first to target protection for its Lloyd’s syndicate.
When the Atela Re 2024-1 catastrophe bond transaction was launched to investors a few weeks ago, Nephila’s target was to secure $100 million or more in aggregate industry-loss index based retrocessional reinsurance for its flagship Lloyd’s syndicate 2357.
We’re now told that the target size for this issuance is expected to be between $90 million and $110 million, so on target.
However, the price guidance that was initially offered has been updated at a considerably higher level for each tranche, once again reflecting cat bond investors demands for a return they feel is commensurate with the risks being assumed.
Atela Re Ltd. is set to issue two tranches of Series 2024-1 cat bond notes, to provide syndicate 2357, via Nephila Syndicate Management, with a three year source of annual aggregate and industry loss index based retro reinsurance protection.
The protection afforded will be against major industry losses from US named storms and US earthquakes, while a franchise deductible will be in place for both perils.
As we reported in our first article related to this cat bond from Nephila Capital, Florida named storm is the most dominant exposure for both tranches of notes, at more than half the expected loss in each case.
When it was launched, the overall target for the issuance was said to be $100 million in size, but the individual tranches did not have target sizes.
Now, the Class A tranche of notes are being offered at between $60 million and $70 million in size, we are told.
The Class A notes have an initial base expected loss of 5.15% and were first offered to investors with price guidance in a range from 11.25% to 12.25%, but we’re now told that guidance has been hiked by 21% from the mid-point of that range, to now be offered with new spread guidance of 14.25%,
The Class B tranche are the riskier layer and we’re told are sized at between $30 million and $40 million.
The Class B notes have an initial base expected loss of 8.36% and were initially offered to investors with price guidance in a range from 18.25% to 19.25%, but that too has been hiked higher by some 17% from the mid-point of that range, to now be offered with spread guidance of 22%.
While industry-loss trigger cat bonds, like industry-loss warranties (ILW’s), have seen their spreads tighten faster and further than indemnity equivalents this year, making the cost of coverage compelling to some, these pricing moves show that the market has still got minimum return requirements it wants to enforce.
Which will send a signal to retrocession buyers about the pricing available in the catastrophe bond market. But, it should also be noted, that on a multiple-at-market basis, for an industry-loss trigger cat bond that is majority exposed to Florida wind, these rates still appear attractive.
You can read all about this new Atela Re Ltd. (Series 2024-1) catastrophe bond transaction and every other cat bond ever issued in our Artemis Deal Directory.
