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2013 cat bond issuance now approaches $4.4bn

Assurant's new Ibis Re cat bond became only the second deal of 2013 to price above broker guidance as a quartet of new bonds neared closure last week, sister publication Trading Risk reported.

Ahead of the hurricane season, cat bond coupons were typically dropping around 16 percent on average during the marketing process amid stiff investor demand.

But the most recent deals to close have priced much nearer expectations. Aside from Ibis Re, coupons on the other three bonds in the pipeline settled 7 to 9 percent below forecasts.

The four deals will take insurance-linked securities (ILS) issuance to $4.4bn for the year to date.

The Ibis Re II issuance was the only one of the quartet to focus solely on US wind risk.

The bond, which upsized by $10mn to $185mn, will provide the insurer with cover on a per-occurrence basis using a Verisk county-weighted industry loss index trigger focused heavily on Florida risk.

The lower-risk $110mn layer priced at the top of the initial guidance range and will offer investors an insurance-linked coupon of 4 percent - equivalent to a 4.7x multiple of the deal's 0.85 percent expected loss.

Two other smaller layers in the deal priced 4 and 8 percent below the mid-point of the original pricing range. Nevertheless, on a weighted average basis, pricing on the deal settled 2 percent above the forecast mid-point.

The only other deal that has priced above broker forecasts this year was the second Caelus Re deal from Nationwide Mutual, which immediately followed an earlier Caelus deal on which the coupon had dropped 28 percent during the marketing process.

Meanwhile, Groupama's Green Fields II bond expanded significantly from a EUR150mn target to EUR280mn as the deal priced at the lower end of guidance, according to sources.

The insurance-linked coupon settled at 2.75 percent, which equates to a 3.2x multiple of the deal's 0.85 percent expected loss. This settled at a higher price than the most recent non-US bond, the Bosphorus Re Turkish quake bond.

Bosphorus carried one of the lowest absolute coupons on offer in the ILS market. Its 250 basis point insurance-linked coupon equated to a 2.5x multiple of the deal's expected loss.

Green Fields II will provide Groupama with per-occurrence cover for French windstorm perils over three-and-a-half years on a weighted industry loss basis.

The mutual has been absent from the cat bond market since 2010.

Meanwhile, Munich Re's latest Queen Street cat bond marked the first time that Australian cyclone risk has been offered to cat bond investors using a modelled loss trigger. Previously, Swiss Re used parametric triggers for bonds containing Australian risk.

Queen Street VIII Re will also provide industry loss-linked cover for US hurricane perils.

It closed on target at $75mn and priced at the bottom of revised pricing guidance, according to sources.

Amlin is also set to complete its second cat bond, Tramline Re II, sourcing reinsurance cover focused mainly on California quake risk.

The bond has closed on target at $75mn and priced at the bottom of pricing guidance, Trading Risk understands.

The cover triggers on a weighted industry loss basis and around two-thirds of the exposure is to commercial lines business.

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