The California State Compensation Insurance Fund is seeking $225m from a renewal of its Golden State Re cat bond to cover US earthquake risk. The four-year Golden State Re II transaction is being offered with a spread of 190-220 basis points (bps). The bond covers 48 US states, the District of Columbia, Hawaii and Alaska on a per-occurrence basis. It uses a modelled loss trigger which is designed to protect the fund’s workers’ compensation portfolio by weighting modelled loss outcomes by the time of a quake to account for working patterns.
The new Residential Re 2018-2 catastrophe bond that is being marketed on behalf of long-standing catastrophe bond sponsor insurer USAA has upsized following strong appetite from investors, with the multi-peril cat bond deal now set to complete offering the firm $200m of fully-collateralised protection. At launch the deal, which is USAA’s 32nd catastrophe bond issuance since it entered the market back in 1997, was targeting just $150m of protection.
US mortgage insurer Radian Guaranty, part of the Radian Group, has completed its first mortgage ILS transaction, securing a slightly upsized $434m from the Eagle Re 2018-1 Ltd. transaction, while simultaneously adding another $21m of excess-of-loss reinsurance coverage. Eagle Re is a special purpose insurer domiciled in Bermuda.
Markel Corporation has completed its acquisition of Nephila, which will continue to operate as a separate business unit. Frank Majors, Nephila’s Co-CEO, commented, “Markel shares our strategic vision for the future of the insurance markets, and we are excited to join Markel, a company with a similar culture, strategic outlook, and long-term focus. We are looking forward to working with the Markel team and are excited by the possibilities from our combined strengths."
The $200m Cal Phoenix Re cat bond, which benefits electrical utility Pacific Gas & Electric Co. (PG&E), one of the USAA-sponsored catastrophe bond tranches and certain private ILS transactions are at risk of losses from the ongoing California wildfire outbreak. ILS manager Twelve Capital said: “If it were established that the Camp fire was caused by Pacific Gas & Electric (PG&E), then this would likely trigger a complete write-down of the Cal Phoenix 2018 Cat Bond."
While it is still early to estimate the total damages from California’s latest round of devastating wildfire activity, AM Best expects that 2018 losses will be at record levels. The Hill and Woolsey fires have claimed more than 95,000 acres and damaged or destroyed an estimated 376 structures, while the Camp fire alone is now considered the deadliest wildfire in the state’s history. According to the rating agency, the potential for historic losses was already likely before the Woolsey fire ripped through the wealthier area of Malibu, which has a median home value of approximately $2.9m.
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Total economic losses from Hurricane Michael – including physical damage and net loss business interruption – is forecast to exceed $15 billion, with public and private insurers likely to incur payouts of at least $8 billion, according to Aon's Impact Forecasting. While the Panhandle was most severely impacted by the hurricane, additional wind and flood-related damage was recorded throughout parts of Georgia, Alabama, South Carolina, North Carolina, Virginia, and Maryland.
Posted: Monday, December 17th, 2018