Arch targets up to $150 million to acquire Claveau Re . Cat Retro Bond

Arch Capital Group, the Bermuda-based specialist insurance and reinsurance company, aims to increase the size of its first reinsurance-focused real estate bond by up to half, with Claveau Re Ltd. Global Multi-Risk Focus (Series 2021-1) release now targets up to $150 million in protection for the company, meanwhile sources tell us pricing guidance has been narrowed toward the lower end of the range initially marketed, indicating To another strong implementation of the cat bond drug.

The Claveau Re deal is particularly interesting because it will cover a very wide range of global risks, demonstrating the use of catastrophe bonds to access the capacity of capital markets, in the form of a loss-inducing industry, to secure global protection against peak catastrophic risks.

At launch, when we first covered this bond about two weeks ago, Arch was seeking $100 million in catastrophe reinsurance from capital markets to cover Arch Reinsurance Ltd’s global reinsurance entity. Lloyd’s Agency Director on behalf of the union 1955.

Now, the company aims to secure between $125 million and $150 million of coverage with this deal, we’re told, thus a potential increase of a quarter if investor demand is there.

Given the high-yield nature of the notes, we would imagine Arch may have little trouble purchasing an additional $50 million of capacity from the market at this time of high investor demand.

This transaction will provide Arch an indexed cover of industry losses against losses from the following risks, over a four-year period: the United States and Canada called storm and earthquake; Severe thunderstorm in the US US wildfires US winter storm Earthquake US Caribbean. Japan typhoon and earthquake; Canada severe thunderstorm Canada winter storm European storm Italy earthquake Turkey earthquake Australia earthquake Australia tropical cyclone; New Zealand earthquake.

We’re told that the bonds will incur once total industry losses, after discounting the applicable concession, reach $55 billion, and coverage will be exhausted at $77.5 billion.

The tranche, now worth $150 million, of Class A bonds issued by Claveau Re Ltd. It will yield an expected initial loss of 7.18%.

Initially, cat bond investors were given feedback with the coupon rate guidance in a range of 17% to 17.75%, but sources tell us that the marketed price guidance range has been narrowed towards the bottom line, at 17% to 17.25%.

As we explained when we disclosed this transaction, the US Natural Hazard Industry Loss Guarantee (ILW) price for a lump sum of $50 billion is expected to be somewhere around the 18.5% to 20% range at this time. Comprehensive multi-risk can be very cost effective once secured from the Cat bond market.

This steep pricing may help entice other global reinsurance players to look for catastrophe bonds for protection they may have previously acquired in the ILW market, or through other traditional reinsurance sources.

You can read all about Claveau Re Ltd. This first (Series 2021-1) from Arch and every other disaster bond deal in our Artemis Deal Guide.

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