Frontline Insurance Secures First Cat Bond of $350M for Southeast Storms

August 6, 2018

Swiss Re Capital Markets has structured and placed the issuance of $350 million of insurance-linked securities by Frontline Re Ltd. on behalf of Frontline Insurance. The transaction is Frontline’s debut catastrophe bond and covers named storms in Alabama, Florida, North Carolina and South Carolina.

Swiss Re Capital Markets underwrote the transaction via two classes of principal at-risk variable rate notes issued by Frontline Re Ltd., a Bermuda exempted company licensed and registered as a special purpose insurer under the Bermuda Insurance Act 1978 and related regulations, each as amended.

The $350 million Frontline Re Ltd. transaction represents the largest cat bond of a Florida-based (non-government entity) insurance company, according to Swiss Re.

The $250 million Class A notes and $100 million Class B notes have a 4-year risk period starting July 1, 2018 and provide protection against named storms. The transaction features an event adjusted attachment level, which for the first time in the cat bond market is based on the event size rank of a named storm within an annual risk period, Swiss Re said.

The transaction is the largest for a Florida insurer since 2014, according to Jean-Louis Monnier, co-head of ILS at Swiss Re Capital Markets, who added the cat bond combines structural mechanics of the Florida Hurricane Catastrophe Fund (FHCF) as well as features of Frontline’s private reinsurance coverage to “seamlessly” integrate with Frontline’s reinsurance program.

Swiss Re Capital Markets acted as sole structuring agent and sole bookrunner for the transaction.

The Frontline Re Ltd. notes were sold pursuant to Rule 144A of the U.S. Securities Act of 1933, as amended 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.

In the U.S., securities products and services are offered through Swiss ReCapital Markets Corp., a registered broker dealer. Swiss Re Capital Markets Corp. and Swiss Re Capital Markets Limited, together Swiss Re Capital Markets, are wholly owned subsidiaries of Swiss Re Ltd.