Willis completes $250 million cat bond for California insurance fund

A recent catastrophe bond transaction between Willis Capital Markets & Advisory (WCMA) and State Compensation Insurance Fund (SCIF) illustrates how investors are welcoming well-structured deals in the changing insurance-linked securities (ILS) landscape, suggests Tony Ursano, CEO of WCMA.

WCMA – part of global risk advisor, insurance and reinsurance broker Willis Group Holdings plc – has structured and placed a US$250 million catastrophe bond transaction for State Compensation Insurance Fund (SCIF), California’s largest provider of workers’ compensation insurance. The bond is called Golden State Re II, notes a statement Friday from Willis.

“The pricing that State Fund was able to obtain on Golden State Re II highlights the rapidly changing dynamics in the ILS landscape over the last three years,” Ursano notes in the statement. “For a similar layer that was placed in 2011, State Fund was able to obtain 25% more capacity while pricing dropped more than 40%. We expect investors to continue to welcome well-structured deals as capacity continues to seek ways to access insurance risk,” he adds.

The transaction, which closed Sept. 16, provides SCIF with US$250 million of fully collateralized protection for workers’ compensation against California earthquake over a term of slightly more than four years and three months.

Golden State Re II – representing SCIF’s second time accessing catastrophe bond capacity (the first bond transaction being in 2011) – has been upsized from US$150 million to $US250 million and the renewal transaction features a modelled loss trigger on a per occurrence basis. The transaction will replace a US$200 million transaction as SCIF chose to increase the capacity it sources from the capital markets, notes the Willis statement.

The Golden State Re II transaction marks WCMA’s seventh successful cat bond placement of 2014 and fifth as sole manager.