American Integrity Insurance Company has returned to the catastrophe bond market seeking at least $150 million or more in collateralized named storm reinsurance protection for three southeast US states, with an Integrity Re Ltd. (Series 2024-1) issuance.
In all of American Integrity’s previous catastrophe bonds the insurer has solely focused the coverage on Florida.
But, for 2024, the insurer is targeting broader coverage, with named storm reinsurance across the states of Florida, Georgia and South Carolina sought.
That’s because American Integrity has been expanding its business, although it must be noted that the expected loss concentration is greatest by far in Florida for this new Integrity Re 2024-1 catastrophe bond.
This has the potential to be a more significant catastrophe bond for American Integrity, with four tranches of notes set to be offered to investors, one of which will provide annual aggregate reinsurance and three to provide per-occurrence reinsurance that would cascade down after events erode lower layers of the insurers’ tower such as its FHCF coverage.
It’s also worth noting that a significant percentage, more than 98%, of the insured values to be covered by this catastrophe bond are in Florida, so this is largely a Florida named storm bond.
With at least $150 million of indemnity based named storm reinsurance sought from this catastrophe bond, with one tranche as yet unsized, across Florida, Georgia and South Carolina, there appears plenty of room to upsize the cat bond should investors have the appetite.
We’re told the notes will cover two risk periods, coming on risk from June 2024, with their coverage running to the end of May 2026 for American Integrity.
A currently $50 million tranche of Class A notes will provide annual aggregate reinsurance, attaching at $120 million and covering a share of losses up to $240 million, with a $10 million event deductible in place and a $60 million per-event cap, we’re told.
The Class A notes have an initial attachment probability of 0.88%, an initial expected loss of 0.22% and are being marketed with spread guidance in a range from 12% to 13%, we understand.
The remaining three tranches all appear to have drop-down or cascading features, so can cascade down the sponsors reinsurance tower as events occur, sources said.
A $50 million Class B tranche will provide per-occurrence protection from a $350 million attachment up to $500 million, giving them an initial attachment probability of 2.58%, an initial expected loss of 2.35% and these notes are being marketed with spread guidance in a range from 14% to 15%.
An unsized Class C tranche would provide per-occurrence protection and attach at $60 million of losses, covering a share to $210 million, giving them an initial attachment probability of 2.64%, an initial expected loss of 2.38% and we’re told these notes are being marketed without spread guidance at this time, with feedback being sought from cat bond investors.
The final $50 million Class D tranche of notes will provide per-occurrence protection from a $200 million attachment up to $350 million, giving them an initial attachment probability of 6.35%, an initial expected loss of 3.56% and these notes are being marketed with spread guidance in a range from 22% to 23%.
It’s an interesting structure and also investment opportunity, with higher-yielding notes on offer, so how the market responds will be fascinating to watch, in terms of investor appetites.