California’s State Compensation Insurance Fund (SCIF) is preparing an as-yet unsized catastrophe bond, according to a presale report published by Standard & Poor’s.
The transaction, Golden State Re II, will transfer the risk of losses from earthquakes over a period of 4.29 years in 50 states in the U.S. and the District of Columbia.
Willis Capital Markets is the bookrunner and structuring agent.
S&P has assigned a preliminary BB+’ to the single class of notes to be issued.
Golden State Re II will deposit the proceeds from the sale of the notes into a reinsurance trust account, and the trustee will transfer these amounts to one or more Treasury money-market funds rated at least 'AAA' by S&P. If the trigger is met SCIF can skip interest payments or even hold on to the principal to cover losses.
SCIF is a public enterprise fund that provides workers' compensation coverage to large and small employers in California. It is not rated by S&P. This is the second time that the fund has accessed the cat-bond market to obtain reinsurance coverage. The initial issuance is scheduled to mature on Jan. 8, 2015.
