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Member, Beacon International Group, Ltd.
SAN ANTONIOUSAA Group is launching a $375 million catastrophe bond to cover U.S. windstorm, thunderstorm, wildfire and earthquake risks.
This is the first time cedants will be transferring a portion of severe thunderstorm, winter storm and wildfire exposure in the occurrence classes, according to Standard & Poor’s Corp.
The bond is being launched under USAA’s special purpose vehicle, Residential Reinsurance Ltd., which is based in the Cayman Islands.
The deal is structured in three tranches, according to New York based-S&P, which is rating the bond. S&P assigned preliminary BB, B+ and B-ratings respectively to the bond’s three tranches.
Assuming issuance amounts of $125 million for each tranche, the first tranche will cover 15.6% of San Antonio-based USAA’s losses between $2.88 billion and $3.68 billion, the second tranche will cover 13.9% of losses between $1.98 billion and $2.88 billion, and the third tranche will cover 17.9% of losses between $1.28 billion and $1.98 billion, according to S&P.
The risk period will begin the day after the deal closes and end on May 31, 2013, with the potential for the bond to be extended by up to 18 months, according to S&P.
The bond will cover hurricane losses in 30 states and the District of Columbia; earthquake losses nationwide, although losses from fire after a quake will not be covered in Hawaii or Alaska; losses because of severe thunderstorms and windstorms in the 48 contiguous states and the District of Columbia; and losses because of wildfire in California only.