Cranberry Re (MPIUA, 2015)
A 300-million-dollar cat bond issued in 2015 for the Massachusetts FAIR Plan, on an annual aggregate basis, which moved this residual market from per-occurrence to annual cover.
A residual market such as the Massachusetts Property Insurance Underwriting Association (MPIUA) insures property the private market declines, and along the coast that property is exposed to storms. Its difficulty is accumulation: several moderate events in one year can cost as much as a single large one, while a per-occurrence treaty responds only to the latter. An annual aggregate cat bond addresses this by adding up all qualifying losses over the year, above a per-event threshold that screens out small claims. Because the trigger is indemnity, the investor bears the underwriting risk of the portfolio, which requires detailed modeling and weighs on the rating. The limit is term: the cover is fixed for three years, whatever happens to the portfolio in the meantime.
Placed in June 2015, Cranberry Re (Series 2015-1) launched at 200 million dollars and grew to 300 million: the notes, rated 'Bsf' by Fitch and due July 6, 2018, attach when MPIUA's annual aggregate losses exceed 300 million and exhaust at 1.4 billion, for named storms, severe thunderstorms and winter storms, with each event required to cost at least 10 million.
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