Great American Insurance Co. is preparing its first catastrophe bond, according to a presale report published by Standard & Poor’s.

S&P has assigned a preliminary ‘BB-‘ rating to the unsized offering of notes to be issued by Riverfront Re. Ltd. (Series 2014-1).  

The notes have an expected term of 2.75 years. They will provide reinsurance against catastrophic losses arising from named windstorms, earthquakes including fire following, severe thunderstorms and winter storms in the covered areas on a per-occurrence basis. The presale report does not name these covered areas, however.

The report also does not give the exact size of the note offering, although it states that there is an attachment point of $100 million and an exhaustion point of $200 million.

Catastrophe bonds transfer the risk of outsized claims to capital markets investors; proceeds are deposited in a money market account. If a trigger, defined in each deal, is met, then the sponsor may stop making interest payments or even hold on to the principal in order to pay claims.  So it appears that Riverfront Re will issue approximately $100 million of notes.

The deal is being offered via the 144a market.

Aon Benfield Securities and Goldman Sachs are joint structuring agents and joint bookrunners. Deloitte & Touche is the claims reviewer and loss reserve specialist.

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