Lion II Re DAC

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Lion II Re DAC - At a glance:

  • Issuer / SPV: Lion II Re DAC
  • Cedent / Sponsor: Assicurazioni Generali S.p.A.
  • Placement / structuring agent/s: GC Securities is lead structuring agent and sole bookrunner. Munich Re is co-structuring agent.
  • Risk modelling / calculation agents etc: AIR Worldwide
  • Risks / Perils covered: European windstorm, European flood, Italy earthquake
  • Size: €200m
  • Trigger type: Indemnity
  • Ratings: NR
  • Date of issue: Jun 2017
  • Artemis.bm news coverage: Articles discussing Lion II Re DAC from Artemis.bm

Lion II Re DAC - Full details

Lion II Re DAC, an Irish domiciled special purpose reinsurance vehicle, is the second Lion named catastrophe bond from Italian insurer Assicurazioni Generali S.p.A.

Lion II Re is an Irish designated activity company, established to issue a single EUR 200 million tranche of catastrophe bond notes that will be sold to investors in order to collateralize a reinsurance agreement between Lion II Re and the sponsor Assicurazioni Generali S.p.A., we understand from sources.

We’re told that the target size of EUR 200 million is the limit and there is no appetite to upsize this catastrophe bond.

The reinsurance agreements between the sponsor and Lion II Re will provide Generali with multi-year, fully-collateralized reinsurance protection from the capital markets against losses from European windstorm, European flooding and Italian earthquake events.

Coverage will be across a four-year term, we’re told, on a per occurrence basis and with the trigger being indemnity.

European windstorm coverage is for all of the countries exposed to that peril, while European flood coverage will be a subset, including the UK, but not Northern Ireland, Germany, Austria, Hungary, Czech Republic, Slovakia, Poland and Switzerland. Italian earthquake coverage is for the entire country.

The Lion II Re catastrophe bond notes will attach at EUR 800 million of European windstorm losses, EUR 1.1 billion of European flood losses, or EUR 600 million of Italian earthquake losses suffered by Generali. We understand that windstorm and earthquake coverage is for the full EUR 200 million, but flood coverage is only a EUR 100 million layer of reinsurance protection.

That means the EUR 200 million of notes issued by Lion II Re will have an initial attachment probability of 3.21% and an expected loss of 2.24%.

In terms of pricing, we’re told that the notes are going to be offered to investors with suggested coupon guidance in a range from 3.5% to 4%.

Update 1:

This cat bond has seen its suggested coupon fall below the initial launch guidance, as ILS investors demonstrate their comfort with the first Euro flood indemnity triggered bond.

Sources said that the latest update reveals that the price guidance has fallen to below that initial range, with the cat bond deal being marketed with spread guidance of 3% to 3.5%.

Update 2:

The final pricing for this Lion II Re cat bond was at 3%, so the bottom of the already reduced range, which is a multiple of just 1.33 times the expected loss.




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