Mercury Insurance, a California-headquartered property and casualty insurer, has secured $ 50.7 million in California wildfire reinsurance protection through a Randolph Re private catastrophe bond (series 2021-1) issued using Aon’s platform.
This is the second transaction revealed that uses the private catastrophe bond issuance and placement platform of Aon broker, Randolph Re.
A year ago, a $ 50.25 million Randolph Re (Series 2020-1) transaction was issued, which we later learned from a source was exposed to wildfire risk in California.
With this new Randolph Re transaction (series 2021-1), we learned that the sponsor, or ceding company, is Mercury Insurance, a property and casualty company that insures a large portfolio of property risks in areas of California prone to wildfires. .
As a result, there’s every chance that this is a renewal of last year’s Randolph Re deal, so we think there’s a good chance that Mercury is also the sponsor of this. private cat bond.
Aon launched the Randolph Re private catastrophic bond platform at the end of 2019, as a platform dedicated to issuing private ILS transactions, in the amount of $ 25 million and above, so that they can be executed in a simplified manner and syndicated to capital market investors.
Private placement bonds placed using Randolph Re are issued by Aon’s special purpose vehicle, White Rock Insurance (SAC) Bermuda Ltd. and the insurance management unit of Aon Insurance Managers brokers manages transactions.
With that, the second Randolph Re show we saw, Aon’s White Rock Insurance (SAC) Ltd., acting on behalf of its separate Randolph Re 2020-1 account and as part of the Randolph Re program, issued $ 50.7 million. series 2021 dollars. -1 note.
The insurance-linked notes issued are due on July 6, 2022 and therefore probably represent a one-year fully guaranteed reinsurance arrangement that has been securitized for the ceding company, which as we said taught us to be Mercury Insurance.
In this case, we know that the real estate disaster risks covered by the reinsurance agreement relate to the California wildfires and we are told that in addition to the wildfires, this agreement will also cover losses due to the following fires. to an earthquake.
As a result, Mercury Insurance will benefit from a single year of $ 50.7 million in California wildfire reinsurance with this latest private catastrophe bond from Randolph Re, with protection offered on a claim trigger basis. and by event, we are told.
We understand that the Notes can attach to $ 450 million in losses and cover up to a depletion point of $ 850 million, so the Notes will cover almost 13% of that $ 400 million risk layer. .
The Notes are structured as a zero coupon deal, which means that the premium has likely been prepaid to investors as in a secured reinsurance arrangement. For this reason, we unfortunately have no information on coupons.
The $ 50.7 million of notes will have been sold to capital market investors, typically dedicated insurance-linked securities (ILS) funds or specialized asset managers with a dedicated categorical bond strategy.
Aon Securities acted as the sole structuring agent and bookrunner for the transaction.
The $ 50.7 million of notes issued under the Randolph Re program and the program itself have both been admitted to the Bermuda Stock Exchange (BSX) for listing.
Mercury Insurance has been one of those who has seen its portfolio particularly affected by the wildfires of recent years, we understand.
The capital markets may have offered an effective and alternative source of reinsurance, to complement its traditional program, resulting in this private cat bond and possibly also the similar Randolph Re deal of the year. last.
You can read all about this Randolph Re private catastrophe bond transaction (series 2021-1) and all other cat bonds in the Directory of Artemis offers.