3264 Re Ltd. (Series 2025-1)

Hannover Re is back in the capital markets to sponsor its fourth catastrophe bond designed to provide it with retrocession using its Bermuda-based special purpose insurance vehicle 3264 Re Ltd.

With this fourth 3264 Re Ltd. catastrophe bond, Hannover Re has expanded the range of perils to include many of the worldwide peak peril categories, with one tranche of notes similar to its soon to mature 2022 transaction under the same structure.

Now, Hannover Re is back and looking to renew the broader, worldwide peak peril transaction with one tranche of its latest 3264 Re cat bond sponsorship, as that $100 million Series 202-1 cat bond matures later this month, while a second tranche is focused on North American earthquake risks only.

3264 Re Ltd., a Bermuda based special purpose insurer, is set to offer and issue two tranches of Series 2025-1 notes to cat bond investors, with the proceeds from their sale set to collateralize reinsurance agreements to benefit sponsor Hannover Re.

With $175 million of notes on offer across the two tranches, this deal could be the largest from 3264 Re to-date.

The two tranches of Series 2025-1 notes being issued by 3264 Re Ltd. are designed to provide Hannover Re with a capital markets backed source of multi-year annual aggregate retrocessional reinsurance.

The list of covered perils between the two tranches is long and global in nature, being: North America named storms and earthquake; US severe thunderstorm and winter storm; Puerto Rico and US Virgin Islands quake; Japan typhoon and earthquake; Canada severe thunderstorm and winter storm; European windstorm; Italy quake; Turkey quake; Australia tropical cyclone and earthquake; New Zealand earthquake.

There is one notable admission in the covered perils compared to the 2022 cat bond, that of US wildfire risks, otherwise it is broadly the same although more Canadian perils are said to be covered this time.

All perils are being covered on an annual aggregate basis using either PCS or PERILS industry loss index triggers, we understand.

The retrocessional coverage for Hannover Re will run across three years, with three annual risk periods that start on February 1st and end January 31st, up to Jan 31 2028.

A $75 million tranche of Class A notes cover all of the worldwide perils mentioned above with event caps and franchise deductibles at a range of index levels for each.

The Class A notes have an initial attachment probability of 10.44%, an initial expected loss of 7.5% and are being offered with spread price guidance in a range from 20.5% to 21.5%, sources said.

A $100 million tranche of Class B notes will only cover the North America earthquake peril, including Canada.

The Class B notes have an initial attachment probability of 1.01%, an initial expected loss of 0.92% and are being offered with spread price guidance in a range from 3.5% to 4%, we understand.

Update 1:

We’re told the target size for this issuance has now risen to up to $200 million of protection for Hannover Re, while the price guidance has been updated.

What was a $75 million tranche of Class A notes will cover a range of worldwide perils with event caps and franchise deductibles at a range of index levels for each and these are now pitched at up to $100 million in size, we’re told.

The Class A notes have an initial expected loss of 7.5% and were initially offered with spread price guidance in a range from 20.5% to 21.5%, but we’re now told the price guidance has been updated to 21.25%, so in the higher end of the range.

A $100 million tranche of Class B notes, that will only cover the North America earthquake peril, including Canada, are still pitched at the same initial size.

The Class B notes have an initial expected loss of 0.92% and were first offered with spread price guidance in a range from 3.5% to 4%, but we’re now told that has fallen to an updated range of 3% to 3.5%.

Update 2:

Hannover Re has secured the upsized $200 million target for retrocession from this new 3264 Re Ltd. 2025-1 catastrophe bond.

The Class A notes were priced to provide $100 million of cover, at a risk interest spread of 21.25%.

The Class B notes also priced to provide $100 million of retro protection to Hannover Re, at a risk interest spread of 3%.