American Family Mutual Insurance Company (AmFam) is back in the catastrophe bond market looking to secure $150 million or more in multi-peril US catastrophe reinsurance protection from this Four Lakes Re Ltd. (Series 2025-1) cat bond issuance, its sixth cat bond sponsorship in as many years, Artemis understands from sources.
American Family Insurance is once again using its Bermuda-domiciled special purpose insurer (SPI) Four Lakes Re Ltd. for this cat bond, with the vehicle offering two tranches of Series 2025-1 notes to investors, we are told.
AmFam is aiming to secure $150 million or more in multi-peril US catastrophe reinsurance protection through its sixth Four Lakes Re cat bond.
The reinsurance will protect the insurer and its subsidiaries against losses caused by US named storm, earthquake, severe thunderstorm, winter storm and wildfire events, which is the same group of perils covered by its previous three Four Lakes Re cat bond issuances, we understand.
This Four Lakes Re Series 2025-1 issuance of cat bond notes will provide AmFam with three calendar year’s of reinsurance, on an indemnity trigger and per-occurrence basis, running from January 2026 to the end of December 2028.
A currently $50 million tranche of Series 2025-1 Class A notes will have an attachment point at $2.7 billion of losses and will cover a share up to $3.375 billion, giving them an initial attachment probability of 1.12%, an initial expected loss of 0.85% and these notes are being offered to investors with price guidance for a risk interest spread in a range from 3.75% to 4.5%, sources said.
A targeted $100 million Class B tranche of notes are riskier, attaching lower down at $1.6 billion of losses, covering a share up to exhaustion at $2.1 billion, coming with an initial attachment probability of 3.94%, an initial expected loss of 2.91% and these notes have risk interest spread price guidance in a range from 6.5% to 7.5%, it is said.
AmFam’s $100 million Four Lakes Re 2022-1 catastrophe bond is scheduled to mature its coverage at the end of this year, so this new Series 2025-1 cat bond is going to replace and build on that coverage for the insurer, it seems.
For pricing comparison, in AmFam’s Four Lakes Re 2023-1 cat bond, a Class A tranche of notes with an initial expected loss of 0.63% priced to pay investors a spread of 5.75%, while a Class B tranche with an initial expected loss of 2.44% priced to pay investors a spread of 9.5%.
In the insurers cat bond from last year, the Four Lakes Re 2024-1 issuance, the Class A notes had an initial expected loss of 1.64% and paid investors an initial risk interest spread of 5.5%, while the Class B notes had an expected loss of 2.77% and paid investors a spread of 8.25%.
So pricing indications are certainly lower for this Four Lakes Re 2025-1 cat bond for AmFam, which could potentially lead the insurer to seek to upsize this deal if the response to it from investors is positive.
You can read all about this new Four Lakes Re Ltd. (Series 2025-1) catastrophe bond from American Family in the Artemis Deal Directory.
