2 weeks ago
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GAREAT, a co-reinsurance pool created for the ceding of compulsory terrorism insurance cover provided in France, has entered the catastrophe bond market for the first time, seeking €100 million or more in terrorism reinsurance from the capital markets from an Athéna I Reinsurance DAC issuance, Artemis can report.
French terrorism risk insurance pool GAREAT, or Gestion de l’Assurance et de la Réassurance des Risques Attentats et actes de Terrorisme, had been expected to enter the cat bond market this year, having begun assessing market appetites over a month ago.
GAREAT was set up in 2002 as a public-private partnership market structure, designed to manage the reinsurance of risk of terrorist attacks in France and its overseas territories.
It provides co-reinsurance solutions for its members and is mandatory for most insurers in France. With cover for losses from terrorist attacks mandatory for most non-life insurance policies in the country, France has a significant amount of terror coverage in-force, compared to many other nations.
We understand from sources that, under the current GAREAT pool structure of its reinsurance, members cover the first €500 million of any terror attack under the scheme, while after that pooled excess-of-loss reinsurance covers losses up to €2.8 billion, beyond which CCR provides coverage backed by state guarantee.
GAREAT covers terrorism consequential property risks, material damage and business interruption, under the scheme and through its resources, which include the private market reinsurance arrangements it procures.
This Athéna I Reinsurance DAC terrorism catastrophe bond will cover a share of €200 million of the risks ceded in the reinsurance layer, we are told.
Athéna I Reinsurance DAC is an Irish domiciled Designated Activity Company established for the issuance of catastrophe bond notes that will be sold to investors.
We understand this debut cat bond for GAREAT will cover physical property damage from terrorism events in France and its territories.
The target size for this first issuance is for at least €100 million in notes to be issued by Athéna I Reinsurance DAC.
The notes will provide GAREAT with indemnity reinsurance protection on an annual aggregate basis, sources told Artemis. This coverage will run across three annual risk periods, for three years from January 1st 2025 to the end of 2028.
The protection will attach at €500 million in losses to GAREAT, so the lower layer of its reinsurance arrangements, covering a share of losses up to €700 million.
The €100 million or more in notes that Athéna I Reinsurance DAC will issue come with an initial attachment probability of 1.14%, an initial expected loss of 0.98% and are being offered to cat bond funds and investors with spread price guidance in a range from 4.75% to 5.5%, we have learned.
This Athéna I Reinsurance DAC cat bond for GAREAT is just the third terror cat bond to ever come to market, the previous two being the Baltic transactions for UK terror reinsurer Pool Re.
As a result, this is an unusual peril for the catastrophe bond market still and many cat bond funds will not be able to invest given their natural catastrophe risk focuses.
But, there are funds and investors that can allocate to this type of risk, so there will certainly be sufficient appetite to absorb this Athéna I Re terrorism cat bond issuance, we expect.
You can read all about this Athéna I Reinsurance DAC terrorism catastrophe bond and every cat bond ever issued in our extensive Artemis Deal Directory.
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