MONTANA RE ISSUE REACHES $175M

Bermudian reinsurer Flagstone Reinsurance Holdings said Monday that its Flagstone Réassurance Suisse unit has acquired three years of retrocessional cover for a range of perils from the issuance of $175m in catastrophe bonds by Cayman Islands-based special purpose vehicle Montana Re Ltd, which was established as a programme structure that in future may issue additional series of notes on behalf of Flagstone. The sum raised is up from the $120m base level initially pitched to the capital markets ( IIN 24, November 19 2009). Montana Re is made up of two tranches — $100m in Class A Notes and $75m in Class B notes. The modified PCS index trigger will have state and peril-specific factors. The hurricane exposure will cover most of the US Atlantic and Gulf coasts, while earthquake cover will protect the 48 contiguous US states, plus Washington DC. Should a trigger occur the notes can be extended for up to 18 months for hurricanes and up to 24 months for earthquakes, to allow for loss development and reporting. Flagstone Chairman Mark Byrne said that "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 earlier deals. Montana Re's design is at the innovative end of the market in both respects".