Arch finalises $100m Ramble Re industry-loss cat bond with ~12% price drop

Arch Capital Group, the Bermuda headquartered specialty insurance and reinsurance company, has now secured the targeted $100 million of industry loss triggered protection from its new Ramble Re Ltd. (Series 2024-1) catastrophe bond, with the notes now priced at around 12% below the mid-point of initial guidance.

Arch’s latest visit to the catastrophe bond market is another strong result for the re/insurer, in securing efficiently priced and diversifying retrocessional reinsurance capital for itself and also signals the continued price pressure seen on cat bonds structured with ILW type industry-loss triggers.

Arch returned to the catastrophe bond market earlier this month with its first Ramble Re cat bond, looking to secure additional capital market backed property catastrophe retrocession for its Arch Re underwriting entity.

Arch Capital is of course a well-known sponsor of mortgage insurance-linked securities (ILS) deals, but then in 2021 sponsored its first property cat bond, the aggregate retro Claveau Re deal which is now listed in our directory of cat bonds facing losses.

This Ramble Re issuance looks to secure narrower coverage, with a focus solely on North American named storms and earthquakes, compared to the Claveau Re deal’s global peak peril coverage.

We’re now told by sources that Arch’s original $100 million target for this Ramble Re cat bond has been secured, with the notes now priced.

Using its recently established Bermuda based company Ramble Re Ltd., this issuance sees a single $100 million tranche of Series 2024-1 Class A notes being sold to investors, to source collateral for a retro reinsurance agreement between Ramble Re and Arch Re.

The $100 million of retrocession from the first Ramble Re catastrophe bond will provide Arch Re with protection on a weighted industry loss trigger and per-occurrence basis, across a three-year term.

Arch Re will benefit from additional retrocessional protection against significant US Northeast named storm and US and Canadian earthquake industry loss events with this new Ramble Re 2024-1 cat bond deal.

The issuance is now confirmed to feature a $100 million tranche of Series 2024-1 Class A notes that will be issued by Ramble Re Ltd.

The notes come with an initial expected loss of 3.19% and were at first offered to investors with spread guidance in a range from 6.75% to 7.5%.

As we later reported, the spread guidance for the Class A notes from Ramble Re was updated and lowered, with a revised range of between 6% and 6.75% on offer to cat bond investors then.

Now, sources tell us the $100 million of Ramble Re Series 2024-1 catastrophe bond notes have been priced to pay investors a spread of 6.25%, so not quite at the bottom of the reduced guidance, but this is some 12% below the mid-point of the initially marketed price range.

Which will mean investors are paid a roughly 1.96 multiple of expected losses, which is again a low multiple as we continue to see with industry loss trigger cat bonds.

As we’ve said before, there has been capital raised into the ILS market that has a particular target for these industry index cat bond deals, so demand for them has been high and helped to squeeze multiples.

But, it’s important also to remember that the improved terms and conditions and narrowed scope of coverage compared to industry-loss trigger cat bonds of a few years ago, does make these a more remote coverage option, so some investors are far more comfortable investing in these deals.

It’s good to see Arch embedding cat bond coverage into its retrocessional arrangements for reinsurance arm Arch Re with this first Ramble Re deal.

You can read all about this Ramble Re Ltd. (Series 2024-1) cat bond sponsored by Arch and every other catastrophe bond deal in our Artemis Deal Directory.