For the first time since XL Group plc’s acquisition of Catlin Group Limited, XL Catlin has utilized the 144A cat bond market as part of catastrophe bond Galileo Re Ltd., which provides aggregate protection against, among other things, earthquakes affecting Canada.
On Thursday, GC Securities, a division of MMC Securities LLC, announced the placement of “three classes of Series 2016-1 Notes, with an aggregate principal amount of $300 million through the existing catastrophe bond shelf program, Galileo Re Ltd., to benefit XL Insurance (Bermuda) Ltd. and certain of its insurance and reinsurance affiliates and related entities,” notes a statement from Guy Carpenter. GC Securities served as sole structuring agent and sole bookrunner, the statement adds.
Guy Carpenter reports that the Series 2016-1 Notes provide annual aggregate protection from named storms affecting the United States, earthquakes affecting both Canada and the U.S., and Europe windstorms affecting select European countries using a weighted industry loss index using industry losses as reported by Property Claim Services and PERILS AG.
“Galileo Re Series 2016-1 Notes demonstrates Guy Carpenter’s and GC Securities’ commitment to providing alternative capital retrocession solutions to the reinsurer community,” Nick Frankland, CEO of Guy Carpenter’s Europe, the Middle East and Africa Operations (EMEA), notes in the statement.
“Alternative capital solutions can be beneficial as the industry goes through organizational changes and consolidation in reaction to the current market environment and impact of competing new capital sources for assuming (re)insurance risk to maintain overall cost-effective capitalization,” Frankland continues.
“XL Catlin also incorporated new flexibility into the transaction structure with respect to annual resets allowing XL Catlin to react to future market conditions while maintaining the cohesiveness and applicability of the Galileo Re protection,” reports Cory Anger, global head of ILS structuring for GC Securities.
“The strong market support for each class within the Galileo Re Ltd. Series 2016-1 Notes provides yet another example of the expanding relevance and competitiveness of capital markets capacity, including for higher-risk profile placements,” comments Chi Hum, GC Securities’ global head of ILS distribution.
GC Securities reported in late January that although 144A property and casualty cat bond primary issuance levels were charted as “uncharacteristically low” in 2015 Q4, totals at year-end were only slightly lower than the all-time high levels seen in 2014.
In a briefing of cat bond activity, GC Securities reported issuance totalled US$5.917 billion and outstanding risk capital totalled US$22.640 billion as of the end of 2015. The risk capital outstanding as of year-end 2015 – US$22.640 billion – was 0.56% lower than 2014’s all-time high in the 144A p&c cat bond market.