Azzurro Re II DAC (Series 2020-1)

This is UnipolSai’s third visit to the catastrophe bond market in search of fully collateralised, capital market investor-backed reinsurance.

Azzurro Re II DAC has been established in Ireland to issue a single tranche of catastrophe bond notes that will be sold to investors and the proceeds used to collateralise a reinsurance agreement between the issuing vehicle and UnipolSai.

For launch, the issuance is targeting a EUR 100 million offering, but we’re told there is room for the cat bond to upsize, should UnipolSai elect to increase it.

The reinsurance protection the cat bond provides will be on an indemnity trigger and per-occurrence basis, covering earthquakes impacting Italy and neighbouring countries, but with the covered subject business all being within Italy.

This is the same type of reinsurance protection that UnipolSai’s 2015 Azzuro Re I cat bond provided it. We’re told the term of coverage will be across roughly three and a half years, to the end of 2023.

The currently EUR 100 million of Series 2020-1 Class A notes to be issued by Azzurro Re II will cover losses across a EUR 150 million layer of UnipolSai’s reinsurance tower, attaching at EUR 200 million of losses, we understand.

The notes will have an initial expected loss of 2.64% and are being offered to cat bond investors with coupon guidance in a range from 4.25% to 4.75%, sources said.

This new Azzurro Re II cat bond from UnipolSai sits much lower down than the insurers 2015 Azzurro earthquake cat bond deal. That transaction attached at EUR 500 million of losses and had an expected loss of just 0.31%, making this Azzurro Re II 2020 cat bond a much riskier proposition.

Update 1:

The Azzurro Re II cat bond issuance from UnipolSai continues to target issuance of a EUR 100 million of Series 2020-1 Class A tranche of notes, having not upsized so far.

However, the pricing has been moved to the mid-point of guidance, at 4.5%, as European perils seem to continue to defy the firming seen elsewhere in catastrophe reinsurance markets.

Update 2:

At pricing the single tranche of notes remained at EUR 100 million in size and pricing settled at the mid-point of guidance, at 4.5%.