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Black Kite Re Limited (Series 2022-1)

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Black Kite Re Limited (Series 2022-1) – At a glance:

  • Issuer: Black Kite Re Limited
  • Cedent / sponsor: Peak Reinsurance Company
  • Placement / structuring agent/s: GC Securities is joint structuring agent, sole bookrunner and sole purchaser. Mercer Investments (HK) Limited is joint structuring agent and co-manager
  • Risk modelling / calculation agents etc: AIR Worldwide
  • Risks / perils covered: Japan typhoon
  • Size: $150m
  • Trigger type: Industry loss index
  • Ratings: NR
  • Date of issue: Jun 2022

Black Kite Re Limited (Series 2022-1) – Full details:

This is only the second catastrophe bond structure to have been located in Hong Kong since the special administrative region of China enacted its special purpose reinsurance vehicle and insurance-linked securities (ILS) regulations.

It is also the first to be sponsored by Honk Kong headquartered global reinsurer Peak Re.

Black Kite Re Limited, which is a Hong Kong registered entity, will seek to issue a single tranche of Series 2022-1 Class A notes, that will be sold to investors and the proceeds used to collateralise a retrocessional reinsurance agreement between the Hong Kong based structure and Peak Reinsurance Company, we’re told.

The single tranche of notes targets at least $75 million of Japanese typhoon retrocession cover for Peak Re, with the notes structured to use an industry loss trigger on a per-occurrence basis across a three-year period from June, we’re told.

The Black Kite Re cat bond uses a CRESTA Industry Loss Index, we’re told, the first time we’ve seen this data source used in a catastrophe bond transaction.

This is interesting, as the CRESTA CLIX service (which is managed by PERILS AG) provides best estimate data on catastrophes, using public and non-public information, so is a little different to other industry loss data services that solely use re/insurer reported loss data.

We’re told the attachment point for the Class A notes will equate to a $12.5 billion Japan typhoon industry loss, as reported by CRESTA, while the exhaustion point will be $15 billion.

As a result, the currently $75 million of Class A notes to be issued by Black Kite Re will have an initial expected loss of 3.22% and are being offered to cat bond investors with price guidance in a range from 5.25% to 5.75%.

Update 1:

Peak Re’s target for its first catastrophe bond, the Black Kite Re 2022-1 issuance, has now been raised to up to $150 million in retro cover.

At the same time, the price guidance for the Series 2022-1 Class A cat bond notes being issued by Black Kite Re has been raised to above the initial range, with an updated guide range of 6.5% to 7% offered.

Update 2:

Peak Re’s first catastrophe bond eventually settled at the upsized $150 million in size, providing the reinsurer with an expanded source of Japanese typhoon retrocession from the capital markets.

The $150 million of Series 2022-1 Class A cat bond notes being issued by Black Kite Re eventually priced to pay investors a 6.9% coupon, so above the initial guidance, but within the updated range.

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