A new catastrophe bond is being offered to investors that has a subsidiary of investment firm One William Street Capital Management, L.P. as its ceding company or sponsor, with the Meadows Ltd. (Series 2025-1) designed to provide $125 million or more in US named storm protection, Artemis has learned.
One William Street Capital Management has around US $8 billion in assets under management and is known to invest in the insurance-linked securities (ILS) asset class, to a range of structures from reinsurance, through sidecars, and cat bonds.
The ceding entity, OIS Series 2 LLC is a fund structure that holds ILS investments for One William Street Capital, we believe, so it seems this cat bond is being issued to source reinsurance or risk transfer capital to provide a hedge for its own insurance-linked securities book.
As a result, it is very interesting to learn that One William Street Capital has entered the catastrophe bond market for the first time.
Meadows Ltd. is a newly registered Bermuda based company that is expected to be licensed as a special purpose insurer (SPI) and be used for issuing catastrophe bonds, we are told.
For this first issuance, Meadows Ltd. is looking to issue three tranches of Series 2025-1 cat bond notes, that will be sold to investors and the proceeds used to collateralize underlying reinsurance agreements between the structure and the ceding company.
We’re told the ceding company is OIS Series 2 LLC, which appears to be a Cayman Islands based private fund managed by One Willis Street Capital and is a wholly owned subsidiary of the company.
At launch to investors, we’re told $125 million or more is the target size for the Meadows Ltd. cat bond, with the reinsurance that provides set to be structured on an industry-loss trigger basis.
Both occurrence and annual aggregate protection are being sought, while the covered peril will be US named storms, although with some differences to covered areas for each of the three tranches of notes on offer. The protection will run through till the end of November 2029, so cover four full hurricane seasons.
The Class A notes are currently targeted at $50 million in size and will provide industry-loss trigger per-occurrence protection against losses from named storms in Florida, Puerto Rico and the US Virgin Islands, we understand.
The Class A notes will come with an initial attachment probability of 7.78%, an initial base expected loss of 6.96% and are being offered to cat bond investors with price guidance in a range from 13.5% to 14.5%.
The Class B notes are also targeted at $50 million in size and will provide industry-loss trigger per-occurrence protection against losses from named storms across the United States 50 states and D.C. but excluding Florida, we are told.
The Class B notes will come with an initial attachment probability of 8.42%, an initial base expected loss of 7.77% and are being offered to cat bond investors with price guidance in a range from 12.5% to 13.5%.
The Class C notes are targeted at $25 million in size and will provide industry-loss trigger annual aggregate protection against losses from named storms across the US states of Florida, Georgia, North and South Carolina, Puerto Rico and the US Virgin Islands, sources said.
For these aggregate Class C notes, we’re told there is a franchise deductible of 15 billion index points per-event, while the attachment is said to be at 30 billion but also with a per-event cap of the same, which effectively makes this an aggregate cat bond tranche that would require two qualifying events to attach, it seems.
The Class C notes will come with an initial attachment probability of 2.22%, an initial base expected loss of 2.14% and are being offered to cat bond investors with price guidance in a range from 8.75% to 9.75%.
We can speculate as to why One William Street Capital has entered the cat bond market at this time. It could be purely to source a hedge as it grows its ILS investment portfolio, or it may be that the investment firm has spotted an opportunity to lock-in efficiently priced industry-loss based risk transfer to hedge its ILS book, perhaps in a way it may have done previously using ILW’s.
With the catastrophe bond market executing strongly from the sponsor side, with spreads having come down, now would be a good time to lock-in longer term hedges using the cat bond structure, than perhaps can be sources from the ILW market.
Of course, it’s also good to see another first time cat bond sponsor enter the market in 2025. While the fact this sponsor is differentiated, in being an investment manager itself, is also encouraging for helping to further promote the fact cat bonds can be valuable hedging instruments for large investment firms as well.
You can read all about this new Meadows Ltd. (Series 2025-1) catastrophe bond from One William Street Capital and every other cat bond transaction issued in our Deal Directory.
