Brookfield sponsoring Aragonite Re cat bond to protect property portfolios

Brookfield Corporation, a Canadian multinational that is one of the largest alternative investment management companies, is looking to the catastrophe bond market and sponsoring a $100 million Aragonite Re Ltd. (Series 2024-1) deal, to provide named storm and earthquake insurance protection for its portfolios of property investments.

The ultimate cedent or insured to this first catastrophe bond for the Brookfield Corporation will be its Brookfield Property Group arm and related entities.

But the company plans to utilise its captive insurer as an intermediary, to front the catastrophe bond issuer for reinsurance and then pass that on as insurance through the Brookfield Property Group insurance arrangements, Artemis has learned.

Here, Brookfield is following in the footsteps of Blackstone, which was the first investment firm to secure catastrophe insurance for its property insurance investment portfolios through the catastrophe bond market and its real estate captive insurer, having sponsored two Wrigley Re cat bond deals.

Aragonite Re Ltd. has been established in Bermuda for the issuance of catastrophe bonds to benefit Brookfield Property Group.

For this first issuance, Aragonite Re Ltd. will look to issue $100 million of Series 2024-1 Class A notes, that will be sold to investors and the proceeds used to collateralize a reinsurance agreement with Obsidian Mutual IC, which is a protected cell of Brookfield’s Vermont based captive insurer Slate Management LLC, we understand.

The protection will then cascade down as insurance to the Brookfield Property Group, covering all of Brookfield’s real estate and property investments.

The Aragonite Re 2024-1 Class A notes are designed to provide a multi-year source of North American named storm and earthquake insurance protection to Brookfield, on a per-occurrence and indemnity trigger protection.

The protection will span the US and Canada, while running across three annual risk periods to March 30th 2027.

The $100 million of Class A notes would attach at $350 million of losses and exhaust coverage at $600 million for US and Canada named storms and earthquake events, aside from for California earthquakes. For California quake events, the attachment point will be $550 million and exhaustion $800 million, we are told by sources.

That gives the notes an initial modelled attachment probability on a combined basis of 0.80%, an initial expected loss of 0.59% and they are being offered to cat bond investors with spread price guidance in a range from 5.75% to 6.50%.

The largest insured value concentrations of the Brookfield property asset portfolio are in New York, California, Texas and Ontario, we understand.

In expected loss terms, California earthquake risk is the biggest contributor at roughly 78% for that section of coverage, while for the other section it is Hawaii and Florida named storms that make up most of the risk, sources said.

It’s very encouraging to see another debut cat bond sponsor and especially so for it to be another large investment firm, as these organisations are coming to appreciate the potential for the capital markets to help them in hedging catastrophe risks embedded in their property and real estate investment portfolios.

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