Farmers Insurance Group complete first cat bond
A major US insurer has successfully closed a $160 million 144A catastrophe bond completed through a newly established, Bermudian-based special purpose insurer.
Farmers Insurance Exchange said that it and its subsidiaries and affiliates comprising the Farmers Insurance Group had entered into a multi-year reinsurance arrangement with Topanga Re Ltd that provided Farmers with indemnity-based coverage.
The catastrophe bond was designed to integrate into Farmers' existing traditional catastrophe reinsurance programme, it said.
Topanga Re issued two tranches of notes as part of the offering, $100 million of Series 2021-1 Class A Notes and $60 million of Series 2021-1 Class B Notes.
The Class A Notes offer four years of per-occurrence protection and the Class B Notes offer two years of annual aggregate protection.
Both classes provide protection against the perils of US named storms, earthquakes, severe weather and fire.
Thomas Noh, Chief Financial Officer of Farmers Insurance Exchange, said: "Farmers is pleased to access the capital markets via this catastrophe bond issuance, which allows us to diversify our capital sources by distributing different levels of risk.
"Obtaining multi-year collateralised capacity from Topanga Re is an important addition to our risk management strategy."
Swiss Re Capital Markets and TigerRisk Capital Markets & Advisory acted as joint structuring agents.
Swiss Re Capital Markets acted as sole book runner and TigerRisk Capital Markets & Advisory as co-manager.
"Swiss Re is proud to have advised Farmers in structuring and placing its first-ever catastrophe bond,” said Jean-Louis Monnier, head of retro and ILS structuring at Swiss Re Capital Markets.
“Investors welcomed the innovative subrogation extension mechanism as it better aligns potential ILS recoveries with those of traditional reinsurance.
“This innovation was essential to allow Farmers to efficiently complement its per-occurrence and aggregate reinsurance programmes with an ILS issuance."
Philipp Kusche, global head of ILS and capital solutions at TigerRisk Capital Markets & Advisory, added: "TigerRisk is delighted to have supported Farmers in its inaugural catastrophe bond transaction expanding their risk transfer options further.
“We were pleased to advise in the establishment of Topanga Re which provides Farmers comprehensive reinsurance coverage on a per-occurrence and aggregate basis."