Acorn Re parametric U.S. quake cat bond set to upsize to $400m

by Artemis on July 3, 2018

The new Acorn Re Ltd. (Series 2018-1) catastrophe bond transaction, that seeks parametric earthquake cover to benefit the Kaiser Permanente health group and other reinsureds of Hannover Re, looks set to upsize by one-third to $400 million, while pricing guidance fell to the bottom of the launch range.

Sources said that the market’s appetite for the second Acorn Re parametric cat bond has been robust and that this renewal deal was well-received, with early order indications helping to grow the offering at the same time as pushing the pricing down.

This Acorn Re 2018-1 parametric earthquake cat bond will now more than replace the soon to mature $300 million Acorn Re Ltd. (Series 2015-1).

Hannover Re acts as the ceding reinsurer for the deal, sitting in front of one named ceding insurer, Oak Tree Assurance Ltd., the Vermont domiciled workers compensation captive owned by the Kaiser Permanente group of health plan companies.

The protection afforded covers U.S. west coast state area earthquakes that occur within a defined parametric box, on a per-occurrence basis and across just over three years.

Hence the parametric U.S. west coast earthquake insurance coverage that the Acorn Re 2018 cat bond provides will cover the Kaiser Permanente workers compensation captives insured exposure to earthquake risks, as well as providing some coverage for other Hannover Re reinsureds which also have exposure within the parametric earthquake box.

The Acorn Re 2018-1 cat bond transaction was launched to the market with a $300m tranche of Series 2018-1 notes which have an initial expected loss of 0.81%. The single tranche of notes is now said to have grown by a third to make this into a $400 million offering.

At the same time, we’re told that the coupon guidance range of 2.75% to 3.25% has now been dropped to the bottom of that range, to offer investors a 2.75% return for their investment in the notes. Even at this lowered level the notes will pay investors a multiple of almost 3.4 times the expected loss.

So yet another 2018 cat bond is set to both increase in size and price down while marketing, continuing the trend for keen pricing and abundant coverage from the ILS market.

You can read all about this Acorn Re Ltd. (Series 2018-1) catastrophe bond transaction and every other cat bond since 1996 in the Artemis Deal Directory.

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