American European prices debut $125m Charles River cat bond 10% below guidance

We are told that first-time catastrophe bond sponsor American European Insurance Company has now successfully priced the $125 million of Charles River Re Ltd. (Series 2024-1) catastrophe bond notes at roughly 10% below the mid-point of initial spread guidance.

Once again, a debut catastrophe bond sponsor is set to come away satisfied with a larger than initially targeted amount of fully-collateralized reinsurance from the capital markets, at pricing below initial expectations.

American European Insurance Company launched its debut catastrophe bond to investors in March, with a target to secure at least $100 million in collateralized catastrophe reinsurance for a portfolio of policies underwritten by managing general agent (MGA) ShoreOne Insurance Managers, a coastal property specialist that offers all-perils coverage including flood.

The cat bond will provide named storm reinsurance protection, for that subject business sourced through the relationship with ShoreOne.

As we subsequently reported, the target size of this issuance was increased, with up to $125 million of reinsurance then sought from this debut Charles River Re cat bond issuance, while at the same time the price guidance was lowered.

We reported again that the $125 million target size was expected to be achieved, but that the price guidance was reduced again.

Now, we’re told that the Charles River Re 2024-1 cat bond notes have been priced and that the top-target for size and the lowest target for price have both been achieved.

So, this Charles River Re 2024-1 cat bond will now secure American European the upsized $125 million in multi-year named storm reinsurance, to protect the ShoreOne originated book across a three-year term up until April 30th 2027, on a per-occurrence and indemnity trigger basis, covering loss events in the states of Massachusetts, New Jersey, New York and South Carolina.

The $125 million of Class A notes come with an initial expected loss of 1.87% and were initially offered to cat bond investors with spread pricing in a range from 7% to 7.5%.

As we later reported in our updates, that range was lowered and updated to new spread guidance of 6.75% to 7% and then lowered again with a final range of 6.5% to 6.75% being offered to investors.

Sources now tell us the $125 million of notes have priced for a spread of 6.5% to be paid to investors, so the bottom-end of twice reduced guidance and a roughly 10% drop in price from the initial guidance mid-point.

Another very strong result for a first-time catastrophe bond sponsor and American European will be delighted with the execution that has been achieved on its behalf.

You can read all about this new Charles River Re Ltd. (Series 2024-1)  catastrophe bond transaction and every other cat bond ever issued in our Artemis Deal Directory.