Flagstone Reinsurance Holdings Limited announced that Flagstone Réassurance Suisse SA, has purchased three years of fully collateralized retrocessional coverage from Montana Re Ltd. a special purpose reinsurer established in the Cayman Islands.
“Montana Re was formed as a program structure enabling further issuance of additional series of notes in the future,” the bulletin explained. “Montana Re offers Flagstone protection on its reinsurance portfolio through two separate tranches, utilizing a PCS index trigger with state and peril-specific personal and commercial payout factors.
“Montana Re has issued $100 million of Series 2009 – 1, Class A Principal-at-Risk Variable Rate Notes due December 7, 2012 and $75 million of Series 2009-1, Class B Principal-at-Risk Variable Rate Notes due December 7, 2012 to collateralize its obligations under the retrocession agreements.”
Chairman Mark Byrne noted: “The cat bond marketplace has been challenged to find index-based trigger structures acceptable to the credit rating agencies for capital relief, and also to find collateral structures which provide acceptable LIBOR returns while overcoming limitations of earlier deals. Montana Re’s design is at the innovative end of the market in both respects.”
Risk analysis for the transaction was performed by Risk Management Solutions, Inc. Peter Nakada, Managing Director of RMS RiskMarkets added: “This transaction was one of the most efficient transactions we have worked on to date, thanks to the combined modeling expertise of Flagstone Re and the RMS team. We look forward to working with Flagstone on similar transactions in the future.”
A.M. Best Co. assigned debt ratings of “bb-” to the $100.0 million Series 2009-1 Class A principal at-risk variable rate notes and “b” to the $75.0 million Series 2009-1 Class B principal at-risk variable rate notes. The rating agency noted that these were the “first series to be issued under the issuer’s principal-at-risk variable rate note program (the program), and in the future, additional notes may be issued under this program.”
Sources; Flagstone Re – www.flagstonere.com; Risk management Solutions – www.rms.com and A.M. Best – www.ambest.com
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