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ART cat bond Blue Halo grows to $185mn

Nephila's fronting partner Allianz Risk Transfer (ART) raised the target for its Blue Halo Re cat bond to $185mn from $150mn as pricing on the high-risk transaction moved towards the upper end of forecasts, Trading Risk reported last week.

The transaction would provide ART with industry loss-based cover for US named storms and earthquakes on a three-year aggregate basis.

The three-year aggregate is an unusual feature for a cat bond and made the deal too risky for some funds, sources said.

However, Blue Halo attracted sufficient demand to expand, albeit with anticipated spreads now 4 percent above the initial midpoint of the targeted range.

The spread on the $130mn class A notes has moved to 1,400 basis points (bps), at the top end of the forecast range of 1,300 to 1,400 bps, sources said.

The notes carry an annualised expected loss of 8.56 percent, using sensitivity-case modelling figures, which produces a 1.6x multiple of risk on an annualised basis.

The insurance-linked coupon on the $55mn class B notes also moved to the upper end of the 1,800-2,000 bps guidance range, settling at 1,975 bps. They bear an annualised expected loss of 13.19 percent, or 39.58 percent over the three-year term - a 1.5x multiple.

The class B notes are offering the second-highest spread on the cat bond market this year, behind one tranche of United's Laetere Re issuance.

Other Allianz entities have previously raised cat bond cover under the Blue Danube, Blue Coast and other series of notes, but this deal would be the first ILS issuance for Allianz Risk Transfer.

As Allianz Risk Transfer fronts for Nephila, providing it with leverage by taking tail risk on the Bermudian manager's portfolio, this transaction would not provide investors with exposure to the broader Allianz portfolio.

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