Lloyd's syndicate ICAT launches first cat bond Buffalo Re

ICAT Syndicate 4242 of Lloyd’s of London has issued its first catastrophe bond Buffalo Re Series 2017-1 that will offer indemnity reinsurance coverage for storms and earthquakes occurring in the US.

The coverage is part of Syndicate 4242’s overall cat reinsurance program that renews on April 1 Willis Capital Markets & Advisory (WCMA) served as the sole structuring agent and bookrunner for the bonds.

According to the Lloyd's underwriter, the bonds were issued in two tranches, with the coverage from the first tranche inuring to the second tranche to provide cascading coverage for multiple events. ICAT Syndicate 4242 buys a reinsurance program of $745 million excess of $40 million per occurrence, with the cat bond supporting $164.5 million of that coverage over a three-year risk period.

With this cat bond issue, ICAT Syndicate 4242 becomes the first Lloyd’s syndicate since 2002 to act as sole sponsor for a cat bond, the company said.

"We are incredibly excited to have completed our first cat bond and to have received such a warm reception from the capital markets," Megan McConnell, active underwriter for ICAT Syndicate 4242. "Notwithstanding our already extensive relationships with capital providers, this transaction offers the syndicate additional sources of capacity and fits seamlessly within our overall reinsurance strategy.

"We are proud to have partnered with Willis Capital Markets & Advisory and their high level of expertise and professionalism has been vital to the successful execution of the transaction."

Brad Livingston, vice president of ILS for WCMA, commented: "WCMA is proud to have supported ICAT Syndicate 4242 in its inaugural catastrophe bond transaction. Syndicate 4242 has been one of the best performing syndicates over the past ten years and ICAT has a reputation for best-in-class catastrophe underwriting in the SME market segment. Investors were eager to support the business through Buffalo Re.

"Buffalo Re provides the syndicate fully collateralised capacity at attractive, stable pricing. We are pleased with the efficiency of the process, not only in minimizing transaction expenses but also in compressing the execution timeline to close in advance of the syndicate’s core reinsurance renewal process. Buffalo Re highlights the benefits and continued ease of execution of fully distributed 144A transactions."

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