TransRe’s Bowline Re the latest cat bond pricing to rise above guidance

TransRe’s new catastrophe bond has become the latest to see its prices rise above initial guidance, with all three tranches of the  Bowline Re Ltd. (Series 2022-1) cat bond deal having their coupons elevated while being marketed to investors.

At the same time, while TransRe’s Bowline Re 2022-1 catastrophe bond was launched with a target to secure at least $175 million of US and Japanese retrocessional catastrophe reinsurance protection for the reinsurer, we now understand that this is expected to be the upper-limit, based on the latest information.

Transatlantic Holdings, the Alleghany Corporation owned parent company to Transatlantic Reinsurance (or TransRe), returned for its third Bowline Re catastrophe bond issuance in April.

The two previous Bowline Re cat bonds only covered losses from US perils on an annual aggregate basis for TransRe, but this third issuance added Japanese earthquake risk into the mix, with TransRe seeking both aggregate and occurrence PCS industry loss index based retrocessional protection across a three-year term from the cat bond market.

But, like almost every cat bond in the market of late, TransRe’s Bowline Re cat bond has seen its pricing raised above the initial guidance range, as the ongoing period of spread widening in cat bonds persists.

All three tranches of notes were previously unsized, but we understood TransRe was seeking at least $175 million of retrocessional protection from this cat bond.

Now, size ranges have been applied, we’re told, but the sum means a maximum issuance size of $175 million, with a chance the deal could end up falling short of that amount.

The Class A tranche of notes, that will provide TransRe with annual aggregate protection against losses from U.S., Puerto Rico, U.S. Virgin Islands, D.C., Canada named storm and earthquake risks, on a territory and business line weighted industry loss trigger basis, are now targeted at between $40 million and $50 million in size, we’re told.

The Class A notes have an initial attachment probability of 2.3%, an initial expected loss of 2.01% and were first marketed to investors with price guidance in a range from 5.75% to 6%, but that price guidance has now been lifted to 6.25% to 6.5%.

The Class B tranche of notes, which will cover the same perils on the same aggregate and industry index basis as the Class A’s, but at a much riskier, lower level, are now targeted at $50 million to $75 million in size, we understand.

The Class B notes have an initial attachment probability of 8.27%, an initial expected loss of 6.85% and were first marketed to investors with price guidance in a range from 15.75% to 16.5%, but this pricing has also been elevated to a fixed point of 17%.

Finally, the Class C tranche, that will provide TransRe with per-occurrence retro reinsurance protection against losses from Northeast US named storms and earthquakes, as well as Japanese earthquakes, on a weighted industry loss index trigger basis, are now sized at $50 million.

These Class C per-occurrence notes will have an initial attachment probability of 5.3%, an initial expected loss of 3.57% and were first marketed to investors with price guidance in a range from 7% to 7.5%, but that has now also been lifted to a range of 7.75% to 8%, our sources said.

So all three tranches have seen their coupon pricing rise by between 5% and 9%, which are far from the most significant increases seen in recent weeks, but continue the trend of spread widening and sponsor price expectations being somewhat disappointed.

You can read all about this new Bowline Re Ltd. (Series 2022-1) catastrophe bond and every cat bond transaction since the market’s inception in the Artemis Deal Directory.