Google’s new disaster bond to settle at $275.5 million

Google and its parent holding company Alphabet, Inc. Now in securing $275.5 million in California earthquake risk protection from a new catastrophe bond issuance, Phoenician Re Ltd. (Series 2021-1). The ultimate goal is $285 million, but with pricing significantly lower than Google’s previous catastrophe bond issuances.

Alphabet, Google’s parent company, is back in the catastrophe bond market in mid-November 2021 as the tech giant looks to add another $250 million or more in California earthquake risk protection to its insurance arrangements, by wiretapping the stock. Associated Insurance (ILS) investors.

This is the third Phoenician banknote series to be issued for Google and Alphabet.

Initially it was a Phoenician Re Ltd deal. (Series 2020-1) in early December 2020, which secured the tech company $237.5 million to protect California earthquake insurance.

This was soon followed by Google’s second catastrophe bond, a $95 million deal for Phoenician Re Ltd. (Series 2020-2) which has expanded the same layer of insurance coverage as the tech giant.

Encouragingly, Google continues to look for capital market building and ILS fund participation in its insurance tower that the tech company is receiving thanks to its catastrophe bonds, with this latest deal set to turn around and sit alongside a previously issued Cat Bond Series.

The Phoenician Re Ltd. targeted. , the Bermuda-based Google special purpose insurance company, issued a $250 million or more class of 2021-1 bond.

As we explained then, the target volume has been raised, with up to $285 million in coverage sought from Google’s disaster bond.

The increase was successful, with the single tranche bond now pegged at $275.5 million, but the ultimate target was not met, suggesting that there is a limit to investor appetite at the asking price.

To date, $275.5 million of Phoenician Re 2021-1 bonds will be sold to secure reinsurance agreements that will eventually go down to provide California earthquake insurance coverage for Alphabet and its Google entities.

Global reinsurer Hannover Re is once again working on seismic risk-shifting for the tech giant, entering into reinsurance agreements with SPI Phoenician Re, and then into reinsurance agreements with captive insurer Imi Assurance based in Hawaii in Alphabet, which In turn, it will provide insurance protection for Alphabet.

The $275.5 million Cat bond will provide Alphabet and its Google operations with a three-year California earthquake insurance source, on a pay-as-you-go basis.

The present value of $275.5 million of Series 2021-1 Class A indicates that Phoenician Re will issue an initial expected loss of 0.51% and was first offered to Cat bond investors with price guidance in a range of 2.25% to 2.75%. That price has tightened to the mid-point, at 2.5%, which is where the cat bonds will now settle, we understand.

It offers investors a relatively high market versatility, just under 5 times the expected loss.

But it’s a much lower multiple of Google’s bonds for previous disasters, although it’s still in proportion to how other California earthquake issues from the likes of CEA are priced.

The 2020-1 bond is priced at 3% for an expected loss (EL) of 0.33%, thus a 9-fold EL multiple, while the 2020-2 bond is priced at 2.9% for an expected initial loss (EL) of 0.247%, so a multiple of 11.7 times EL.

So this is entirely a result of Google, with its high-risk cat bonds, on an expected loss basis, and below-coupon pricing on its two previous low-risk deals just a year ago.

Which certainly reflects a drop in cat bond prices through 2021, but also likely reflects the fact that Google’s insurance tower is now increasingly familiar with the catastrophe of bond funds and investors, which has improved execution for the company.

You can read all about Google’s new catastrophe bond, the Phoenician Re Ltd transaction. (Series 2021-1), along with every other Cat Bond deal released in Artemis Deals Directory.

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