Farmers Insurance office in Maryland. Photo: Diego M. Radzinschi/ALM

Farmers Insurance has closed a $400 million catastrophe bond, the insurer’s second issuance and largest to date.

The bond was completed through Topanga Re, which issued two tranches of notes as part of the offering: $300 million of Series 2025-1 Class A Notes and $100 million of Series 2025-1 Class B notes.

Both classes of notes offer four years of per-occurrence and indemnity trigger protection against the perils of U.S. named storms, earthquakes, severe weather and fire.

"Farmers is pleased to access the capital markets via this catastrophe bond issuance which allows us to diversify our capital sources and manage risk," said Thomas Noh, chief financial officer of Farmers Insurance Exchange, in a statement. "Obtaining multi-year collateralized capacity through Topanga Re is an important component of our risk management strategy."

Insurance-linked securities (ILS), like catastrophe bonds, allow insurers to offload some of their risk to investors, who are paid premiums but risk losing principal if a catastrophic event happens. Many insurers use cat bonds to supplement traditional reinsurance programs.

Swiss Re Capital Markets and Howden Capital Markets & Advisory acted as joint structuring agents and joint bookrunners on the Farmers bond.

"Swiss Re is proud to have advised Farmers in structuring and placing this innovative catastrophe bond, which demonstrates how the ILS market can act as a complement to traditional reinsurance by providing top and sideways cover," said Jean-Louis Monnier, CEO of Swiss Re Capital Markets, in a statement. "Acceptance of this drop-down mechanic demonstrates investors' increased sophistication and willingness to support clients like Farmers, allowing the ILS market to better align with traditional reinsurance."

Photo credit: Diego M. Radzinschi/ALM

NOT FOR REPRINT

© Arc, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.