Assicurazioni Generali’s Lion I Re cat bond to upsize, price down

The first catastrophe bond issued by Assicurazioni Generali S.p.A., one of the largest insurers in Europe and the world, is set to increase in size to between €180m and €190m while pricing on the Lion I Re Limited cat bond has dropped.

Generali’s first visit to the catastrophe bond market launched ten days ago, with its Irish special purpose insurer Lion I Re Ltd proposing issuance of a single tranche of cat bond notes sized at €150m. The notes are designed to provide Generali with a fully-collateralized source of multi-year reinsurance protection against European windstorms.

The European windstorm protection that the Lion I Re cat bond notes will provide Assicurazioni Generali is on an indemnity and per-occurrence basis. This is only the second European windstorm cat bond to use an indemnity trigger after the Windmill I Re Ltd. cat bond deal late last year.

Artemis understands that the €150m tranche of notes has upsized and is expected to complete around €180m to €190m in size, a possible increase of 27%.

At the same time the price guidance has been reduced. The Lion I Re cat bond was initially marketed with a coupon price range of 2.5% to 3% but that range has been narrowed and lowered to below the bottom of that range, with the notes now offered with a coupon of 2.25% to 2.5%. If it prices at the bottom of the reduced range, at 2.25%, it would be a reduction in price of 18% from the middle of the original guidance.

The pricing would make this one of, if not the, lowest yielding European windstorm cat bond ever, which given it features an indemnity trigger is a demonstration of the ILS markets appetite for new risk as well as its growing comfort with indemnity triggers for this peril.

While it may have seemed likely that Generali could, given the size of its reinsurance program and exposures in Europe, have significantly upsized this cat bond, its successful upsizing and low pricing will provide a good base for the insurer to revisit the cat bond market from in future. Generali has significant global exposures that it could utilise the cat bond market to transfer to capital market investors. If the insurer can get comfortable with the issuance process and the value a cat bond can add then we would expect to see ILS become a growing part of its risk transfer.

The Lion I Re Ltd. catastrophe bond is expected to complete within the next week. We will update you as the transaction progresses to market and you can find all the details on Lion I Re in the Artemis catastrophe bond Deal Directory.

Q1 2014 Catastrophe Bond & ILS Market Report – A Record Quarter

Don’t forget to download your copy of our Q1 2014 catastrophe bond & ILS market report.

This report reviews the catastrophe bond and insurance-linked securities (ILS) market at the end of the first-quarter of 2014, looking at the new risk capital issued and the composition of the transactions completed during Q1 2014. Download your copy here.