SCIF Cat Bond Priced 40% Lower Than 2011: Willis Capital Markets

September 28, 2014

On Friday, Willis Capital Markets & Advisory said it placed a $250 million catastrophe bond transaction for, California’s largest provider of workers’ compensation insurance.

Golden State Re II represents State Compensations Insurance Fund’s second time accessing catastrophe bond capacity, WCMA said.

In a statement about the transaction providing State Fund with $250 million of fully collateralized protection for workers compensation against California earthquake over a term of more than four years, WCMA CEO Tony Ursano said the bond pricing “highlights the rapidly changing dynamics” in the insurance-linked securities landscape over the last three years.

Northridge  California Earthquake  (AP Photo/Doug Pizac, File)
Northridge California Earthquake
(AP Photo/Doug Pizac, File)

“For a similar layer that was placed in 2011, State Fund was able to obtain 25 percent more capacity while pricing dropped more than 40 percent,” Ursano said.

WCMA said the renewal transaction features a modeled loss trigger on a per occurrence basis, similar to the one used by State Fund in its first catastrophe bond transaction in 2011. Investors were eager to support this transaction as it upsized from $150 million to $250 million while settling in at the bottom end of the initial pricing guidance of 2.20 percent to 2.70 percent.

The transaction will replace a $200 million transaction as State Fund chose to increase the capacity it sources from the capital markets.

The transaction marked WCMA’s seventh successful cat bond placement of 2014 and fifth as sole manager.

Source: Willis; Willis Capital Markets & Advisory