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Validus Re’s first cat bond grows by 23%

Validus Re's first cat bond proved to be popular with investors, expanding by 23 percent over the course of marketing to reach $400mn.

Despite the recent losses from hurricanes Harvey, Irma and Maria (HIM), pricing was pushed down on all three tranches of the annual aggregate deal, which was twice oversubscribed, sources said.

The Tailwind Re bond has exposure to many of the areas impacted by last year's catastrophes. It will cover named storms and earthquakes in the US, Puerto Rico, the US Virgin Islands and Canada.

The high-risk class C layer increased in size to $100mn, from an initial target of $75mn. Pricing for this layer was pushed down to 1,000-1,150 basis points (bps) from an initial range of 1,150-1,250 bps.

The class A tranche expanded from $125mn to $150mn, while pricing came down to 725-775 bps from 775-850 bps.

The class B notes also increased in size from $125mn to $150mn. Pricing for this layer dropped to 900-950 bps from an initial guidance of 950-1,025 bps.

Trading Risk sources said the pricing was disappointing for the cat bond market, pointing to only a small increase from pre-HIM rates.

Validus was the second new sponsor to join the cat bond market at the end of last year.

Covea Group entered the market with a EUR90.0mn ($106.8mn) maiden Hexagon Re cat bond, which also settled below the lower end of the initial pricing range, although this deal covers France and not the areas impacted by the HIM losses.

Cat bond regulars XL Bermuda, USAA and the California Earthquake Authority also issued bonds in the final quarter of last year. Following these issuances, GC Securities said that cat bond rates had only increased slightly for remote risk layers following the third quarter losses.

 

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