The Bermuda incorporated special purpose vehicle, Topanga Re Ltd, has issued two classes of principal at-risk variable rate notes representing the largest catastrophe bond transaction for the Farmers Insurance Group.

Swiss Re Capital Markets structured and placed the $400 million cat bond, providing collateralised reinsurance protection against named storms, earthquakes, severe weather and fire in the United States.

The Series 2025-1 Principal At-Risk Variable Rate Notes transaction issued by Topanga Re represents the second issuance to be completed by Farmers.

Swiss Re Capital Markets, as the joint structuring agent and joint bookrunner, said: “Through the issuance, Farmers secured $400 million of per-occurrence protection across a 4-year risk period on an indemnity basis.”

The $300 million Class A Notes incorporate an innovative drop-down mechanism within the per occurrence coverage that allows the Class A Notes to act as reinstatement coverage to Farmers' traditional reinsurance programme in certain third-event scenarios.

The transaction again incorporated the 4-year subrogation extension feature to improve the mechanics by which investors are able to benefit from subrogation recoveries, first introduced in Farmers' inaugural transaction in December 2021.

Jean-Louis Monnier, CEO of Swiss Re Capital Markets Corporation, said: “Swiss Re is proud to have advised Farmers in structuring and placing this innovative catastrophe bond, which demonstrates how the ILS market can act as a complement to traditional reinsurance by providing top and sideways cover.

“Acceptance of this drop-down mechanism demonstrates investors' increased sophistication and willingness to support clients like Farmers, allowing the ILS market to better align with traditional reinsurance.”

The Topanga Re Ltd notes were sold under US Securities laws and have not been registered under the Securities Act or any state securities laws; they may not be offered or sold in the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and applicable state securities laws.