Weston’s Marlin Re catastrophe bond issuance never completed

We’ve learned from sources that Florida focused P&C insurer Weston Insurance never actually completed its debut catastrophe bond deal, the what was supposed to have been $45 million Marlin Re Ltd. (Series 2022-1) cat bond deal.

It’s a little unusual, as after a prolonged period of marketing and a bit of a restructuring, the Marlin Re 2022-1 catastrophe bond for Weston Insurance did actually price, with the expected $45 million of Class A cat bond notes slated to pay investors a 16% coupon.

The news of the pricing was just in advance of the expected settlement date, when the issuance would have completed.

But, for some reason, the decision was taken to pull the Marlin Re 2022-1 cat bond deal right in the final days.

Of course, as we reported yesterday, Weston Property and Casualty Insurance, a coastal risk focused insurance carrier, is now heading for insolvency, after the Florida insurance regulator initiated delinquency proceedings against it.

Which likely goes quite a way towards explaining the issues that meant the cat bond issuance never got completed.

Weston, which counts insurance-linked securities (ILS) investment manager Hudson Structured Capital Management (investing as HSCM Bermuda), as its majority stakeholder, had its all-important Demotech ‘A’ rating downgraded to a NR Not Rated status at the beginning of the week.

The Florida Office of Insurance Regulation deems Weston P&C Insurance “impaired or insolvent”, but it does not seem the carrier is deemed viable enough as a going concern to qualify to fall under the new guarantee arrangement with Florida Citizens support.

An affidavit from the regulatory Commissioner’s office explains that as the renewals approached, Weston could not fill the lower layers of its reinsurance tower that it needed, which may well have included this mooted cat bond and that it also participated in the new Florida RAP reinsurance arrangement, but that hasn’t helped it survive it seems.

There were other issues that the regulator raised which might have been related, or at least influential, such as a mooted captive arrangement (the Weston cell) to boost Weston’s risk capital that never materialised it seems, as well as capital borrowed from another managing agent unit.

The upshot of all of this was insufficient surplus capital to sustain a rating it seems, which is the main driver for the Regulator’s pushing Weston towards insolvency and seemingly why it so far hasn’t been cited as qualifying for the Citizens guarantee support.

So it’s perhaps no surprise the cat bond never got issues, as while Weston sorely needed reinsurance protection, it also needed capital as well, meaning spending the necessary funds to close the cat bond was likely seen as a step too far when its business may not have been sustainable anyway.

We’ve marked the Marlin Re 2022-1 cat bond for Weston as “Not issued” in our Deal Directory now and removed it from our data, cat bond market charts and market analytics.

You can read all about the Marlin Re Ltd. (Series 2022-1) catastrophe bond that never actually got issued, as well as details of every other cat bond deal in our extensive Artemis Deal Directory.

Read all of our news and analysis on the Florida insurance and reinsurance market.

———————————————————————
Tickets are selling fast for Artemis London 2022, our first ILS conference in London. Sept 6th, 2022.