Specialist financial guarantee insurer Build America Mutual (BAM) has secured $150 million of fully collateralized reinsurance via a third issuance through its Bermuda special purpose insurer (SPI), Fidus Re.
Following this transaction, BAM’s claims-paying resources now total more than $1.4 billion.
Seán W. McCarthy, Chief Executive Officer of BAM, commented, “Volatile market conditions are continuing to drive strong demand for BAM-insured bonds from investors who are focused on liquid bonds with durable, high-quality ratings.
“The latest Fidus Re transaction demonstrates BAM’s focus on serving our member issuers and investor stakeholders by maintaining excellent financial strength.”
The deal follows BAM’s initial entry into the ILS market back in 2018 with its first $100 million Fidus Re (Series 2018-1) transaction, the first catastrophe bond like vehicle for transferring financial guarantee insurance risks to the capital markets.
Last year, the insurer returned with a larger $150 million Fidus Re (Series 2021-1) deal, extending the capital markets participation in its reinsurance tower on a fully-collateralized basis.
The 2022 Fidus Re transaction structure is materially the same as the aforementioned deals. Noteholders are exposed to losses above a $110 million retention on a covered portfolio, at which point they share 90% of losses across a $167 million layer of the tower beyond that.
The excess-of-loss reinsurance agreement sees the Fidus Re 2022-1 notes providing cover against aggregate losses which exceed that attachment point, across the pre-defined and importantly static portion of BAM’s inforce financial guarantee portfolio.
Each of the three Fidus Re financial guarantee ILS deals cover a different pre-defined and static portfolio of subject business made up of scheduled principal and interest payment on select bonds which have already been insured by BAM.
BAM was established by the National League of Cities with initial capital from White Mountains and is focused on U.S. municipal-only bonds.
Fidus Re is a Bermuda-based SPI that issues and sells notes to investors, with the proceeds used to collateralize an excess-of-loss reinsurance agreement between Fidus Re and the sponsor, BAM.
On a related note, BAM has also announced its Q3 2022 statutory financial results, showing $13.5 billion par insured and $109 million in total premiums, BAM’s strongest nine-month results on record.
