AmFam targets its fifth Four Lakes Re multi-peril catastrophe bond at $175m

American Family Mutual Insurance Company (AmFam) has returned to the catastrophe bond market for now the fifth year in a row, with a target this time to secure $175 million in protection from this Four Lakes Re Ltd. (Series 2024-1)  cat bond issuance, to expand its capital markets backed multi-peril catastrophe reinsurance, Artemis has learned.

This will be the seventh catastrophe bond sponsored by American Family that we have listed in the Artemis Deal Directory and the fifth in the Four Lakes Re series from the company, having sponsored an issuance under this name every year since 2020.

For its latest cat bond, American Family Insurance is again using its Bermuda-domiciled Four Lakes Re Ltd. special purpose insurer, with the vehicle offering two tranches of Series 2024-1 notes to investors, we are told.

AmFam is targeting $175 million or more in multi-peril US catastrophe reinsurance protection through this new cat bond.

That reinsurance will cover the insurer and its subsidiaries against losses from US named storms, earthquakes, severe thunderstorms, winter storms and wildfires, the same range of perils as its previous two Four Lakes Re cat bond issuances.

The Four Lakes Re 2024-1 cat bond notes will provide AmFam with three calendar year’s of per-occurrence and indemnity trigger based reinsurance, running from January 2025 to the end of December 2027, we understand.

A targeted $125 million Class A tranche of Series 2024-1 notes will have an attachment point at $1.8 billion of losses and will cover a share up to $2 billion, giving them an initial attachment probability of 1.84%, an initial expected loss of 1.64% and these notes are offered to investors with spread price guidance in a range from 5.75% to 6.5%, sources said.

A targeted $50 million Class B tranche of notes would attach lower down at $1.2 billion of losses, covering a share up to exhaustion at $1.8 billion, so are riskier, coming with an initial attachment probability of 4.1%, an initial expected loss of 2.77% and these notes have spread price guidance in a range from 8.5% to 9.25%, it is said.

AmFam’s $125 million Four Lakes Re Ltd. (Series 2021-1) is slated to mature at the end of this year, so this new Series 2024-1 cat bond looks set to more than replace that reinsurance coverage for the sponsor.

In last year’s Four Lakes Re 2023-1 cat bond, a Class A tranche of notes with an initial expected loss of 0.63% priced to pay investors a spread of 5.75%, while a Class B tranche with an initial expected loss of 2.44% priced to pay investors a spread of 9.5%.

So, the pricing looks tighter, but a lot has changed at AmFam in the last year, not least the fact it secured a significant US $1.25 billion investment into its reciprocal insurer Trusted Resource Underwriters Exchange (TRUE) from Gallatin Point Capital.

Because of that, the exposure base of American Family Insurance and its subsidiaries has increased, we understand.

You can read all about this new Four Lakes Re Ltd. (Series 2024-1) catastrophe bond from American Family in the Artemis Deal Directory.