First Catastrophe Bond of 2016 is From XL Insurance (Bermuda)

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XL Insurance (Bermuda) has completed a $300 million catastrophe bond, according to GS Securities, the deal’s sole structuring agent and bookrunner.

It’s the XL Group’s first offering of bonds transferring the risk of damage from natural disasters since it acquired Catlin Group last year. It’s also the first of cat bond by anyone this year, according to the website

Galileo Re Ltd. Series 2016-1 offers exposure to named storms affecting the U.S., earthquakes in affecting the U.S. and Canada, and windstorms affecting select European countries.

The deal consists of three classes of notes with an expected maturity of January 2019:  $100 million of class A notes pay 13.5% over a benchmark; $100 million of class B notes pay a spread of 9%; and $100 million of class C notes pay a spread of 7%.

The trigger for this cat bond is weighted industry loss, using industry losses as reported by Property Claim Services for the U.S. and Canada and PERILS AG for Europe. If the trigger is met, XL can retain some or all of the principal to pay insurance claims.

The Series 2016-1 Class A Notes have the third highest annual expected loss (9.52%) and the third highest annual attachment probability (13.98%), each based on the AIR’s sensitivity catalog for Named Storms, relative to all outstanding 144A P&C catastrophe bonds. The Class B and Class C Notes have one year expected losses (based on sensitivity catalog for Named Storms) of 4.96% and 3.09% respectively.

Catlin used the Bermuda domiciled special purpose insurance vehicle to sponsor two prior deals before it was acquired by XL Insurance: the $300 million Galileo Re Ltd. (Series 2013-1) transaction and the $300 million Galileo Re Ltd. (Series 2015-1).



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