Azzurro Re II DAC (Series 2024-1)

Italian insurer UnipolSai Assicurazioni S.p.A. has returned to the catastrophe bond market for its fifth time, seeking more fully collateralised, capital market investor-backed European earthquake reinsurance protection.

The last time UnipolSai was in the catastrophe bond market was back in 2022, when the company attempted to secure a similar €100 million slice of collateralized reinsurance through the Azzurro Re II 2022-1 earthquake cat bond.

However, that issuance was cancelled, due to conditions in the ILS market and broader capital markets, as well as the effect this had on investor appetite and UnipolSai’s 2022 cat bond was one of those that suffered, so the company elected to halt that issue, with a plan to return to the cat bond market once conditions had stabilised and more capacity was available.

Now, with catastrophe bond and broader capital market conditions far more conducive to strong execution, UnipolSai is back for an only slightly changed Azzurro Re II 2024-1 issuance, we understand.

Irish designated activity company Azzurro Re II DAC will issue a single tranche of catastrophe bond notes that will be offered for sale to investors and the proceeds from that sale used to collateralize an earthquake reinsurance agreement between the issuing vehicle and UnipolSai.

The target size for this Series 2024-1 issuance is €100 million and we understand is not deemed likely to upsize from that, as this Azzurro Re II 2024-1 cat bond coverage will span a €100 million layer of UnipolSai’s reinsurance tower.

The earthquake reinsurance protection this new cat bond will provide is very similar to the previously successful 2020 issuance and the structure of the halted 2022 deal.

The reinsurance coverage will be on an indemnity trigger and per-occurrence basis, covering claims related to earthquakes impacting Italy and neighbouring countries, but with the covered subject business and so exposure base predominantly within UnipolSai’s home country of Italy.

The term of coverage will be across four years, we are told, with maturity slated for early April 2028.

The targeted issuance of €100 million of Series 2024-1 Class A notes by Azzurro Re II DAC will cover a €100 million layer of UnipolSai’s reinsurance tower, attaching at €250 million of losses and exhausting at €350 million, we understand.

The 2024-1 notes will have an initial attachment probability of 3.02%, an initial expected loss of 2.46% and are being offered to cat bond investors with coupon guidance in a range from 5.75% to 6.5%, sources have told us.

Update 1:

The Azzurro Re II 2024-1 Class A notes have remained at €100 million in size so far, but the pricing has been updated and fixed at the upper-end for a spread of 6.5%, we are told.

Update 2:

At pricing we’re told UnipolSai secured the targeted €100 million of earthquake reinsurance with this new cat bond, with the pricing finalised at the top-end of initial guidance, for the 6.5% spread.