AmFam seeks fourth Four Lakes Re catastrophe bond, a $150m multi-peril cover
American Family Mutual Insurance Company, or AmFam as it is abbreviated, is back in the catastrophe bond market for now the fourth year running, this time seeking $150 million or more in capital market backed multi-peril catastrophe reinsurance, with a new Four Lakes Re Ltd. (Series 2023-1) cat bond issuance.
American Family (AmFam) has now sponsored a Four Lakes Re catastrophe bond every year since 2020, as it brings the capital markets deeper into its reinsurance arrangements.
However, this will actually be American Family’s sixth venture to the catastrophe bond market, as the insurer had sponsored the two fated Mariah Re catastrophe bonds back in 2010, which had both been triggered by severe tornado losses.
For this 2023 cat bond, AmFam is using the same Bermuda based Four Lakes Re Ltd. special purpose insurer, with the vehicle set to offer two tranches of notes to investors, we understand.
Across the deal, AmFam is aiming to secure at least $150 million in multi-peril US catastrophe reinsurance protection, covering it and its subsidiaries against losses from US named storms, earthquakes, severe thunderstorms, winter storms and wildfires, the same range of perils as its cat bond issuance of a year ago.
The Four Lakes Re 2023-1 cat bond notes will provide AmFam with per-occurrence and indemnity trigger based reinsurance, across a three calendar year term, from January 2024 to the end of December 2026, we are told.
A currently $100 million Class A tranche of notes have an attachment point at $2 billion of losses and will cover a share up to $3 billion, giving them an initial attachment probability of 0.71%, an initial expected loss of 0.63% and these notes have spread price guidance in a range from 5% to 5.75%, we understand.
A currently $50 million Class B tranche of notes would attach lower down at $950 million of losses, exhausting at $1.5 billion, so are riskier, giving them an initial attachment probability of 4.19%, an initial expected loss of 2.44% and these notes have spread price guidance in a range from 9% to 9.75%, it’s said.
It’s encouraging to see AmFam looking to continue the layering of catastrophe bond protection through its reinsurance tower, with now four annual issuances completed in the Four Lakes Re series of deals.
The $175 million Four Lakes Re Ltd. (Series 2020-1) matures at the end of this year, so presumably AmFam would want to replace that expiring coverage, if it can.
Of course, the pricing is commensurately higher than that deal, given the costs of reinsurance and cat bond coverage are now far higher than back in late 2020.
You can read all about this new Four Lakes Re Ltd. (Series 2023-1) catastrophe bond from American Family in the Artemis Deal Directory.
