Mitsui’s Akibare Re 2016 cat bond grows to $200m, pricing drops

by Artemis on March 3, 2016

The latest catastrophe bond from sponsoring Japanese insurance group Mitsui Sumitomo has grown in size to $200 million, while pricing on the Akibare Re Ltd. (Series 2016-1) issuance has dropped to the low-end of guidance.

Mitsui Sumitomo Insurance Co. Ltd., a subsidiary of MS&AD Insurance Group Holdings, is set to secure $200 million of fully-collateralised reinsurance protection for the covered peril of Japanese typhoon risks.

The reinsurance protection from the Akibare Re 2016-1 cat bond will be on an annual aggregate and indemnity trigger basis for losses from Japanese typhoons which cause Mitsui Sumitomo a loss above a JPY 5 billion franchise deductible across a four-year deal term.

When the Akibare Re 2016-1 cat bond was launched the deal was sized at $175 million of notes, in a single Class A tranche. That tranche has now increased in size by almost 15% to $200 million, according to sources, as investors help Mitsui Sumitomo to increase its use of cat bond coverage.

This catastrophe bond will replace and expand the capital markets reinsurance protection that Mitsui Sumitomo enjoyed from its previous Akibare II Ltd. cat bond. Akibare II matures at the end of March 2016 and was $130 million in size, so it’s encouraging to see Mitsui Sumitomo growing its relationship with capital market ILS investors with this new transaction.

At launch the Class A notes came with price guidance of 2.5% to 3%. Demonstrating the attraction of diversifying perils and their ability to drive down prices, even at lower risk/return levels, we understand that pricing was adjusted today to the lower end of that guidance range, at a coupon of 2.5%.

With the now $200 million tranche of Akibare Re 2016-1 notes having an expected loss of 1.19%, the new pricing level would see investors receive a multiple of 2.1 times the expected loss. That’s aligned with the multiple of other remote risk cat bond diversifiers in the Japanese region, particularly from such large and established insurance group sponsors.

Final pricing is due tomorrow for this cat bond, we are told, with completion of the deal slated for the middle of March.

We’ll update you should there be any further changes as the Akibare Re Ltd. (Series 2016-1) catastrophe bond progresses to market and you can read about this and every other cat bond in the Artemis Deal Directory.

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