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Commonwealth Re Ltd. (Series 2023-1)

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Commonwealth Re Ltd. (Series 2023-1) – At a glance:

  • Issuer: Commonwealth Re Ltd.
  • Cedent / sponsor: The Hanover Insurance Group
  • Placement / structuring agent/s: GC Securities is sole structuring agent and bookrunner
  • Risk modelling / calculation agents etc: AIR Worldwide
  • Risks / perils covered: Northeast U.S. named storm
  • Size: $150m
  • Trigger type: Indemnity
  • Ratings: NR
  • Date of issue: Jun 2023

Commonwealth Re Ltd. (Series 2023-1) – Full details:

US primary insurer The Hanover Insurance Group, Inc. has returned to the catastrophe bond for what will be its second issuance.

Using its Bermuda special purpose insurer named Commonwealth Re Ltd., sponsor The Hanover Insurance Group is seeking at least $125 million in Northeast US named storm reinsurance protection from the capital markets, on a multi-year and fully-collateralized basis.

Commonwealth Re Ltd. will issue a single tranche of Series 2023-1 Class A notes, designed to provide the sponsoring insurer with three years of reinsurance protection against Northeast US named storm losses, across the states of Connecticut, Delaware, DC, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Vermont and Virginia.

We’re told the $125 million or more in Commonwealth Re 2023-1 cat bond notes will provide reinsurance to The Hanover on an indemnity and per-occurrence basis, over a three year term running to maturity at July 8th 2026.

The Class A notes will have an attachment point at $1.3 billion of losses and exhaust their coverage at $1.6 billion in the reinsurance tower, sources said.

Which gives the $125 million or more in Class A notes an initial attachment probability of 0.66%, an initial base expected loss of 0.57% and they are being offered to investors with spread price guidance in a range from 4% to 4.5%.

Update 1:

The Hanover’s target for its second catastrophe bond was increased to $150 million, while the price guidance was narrowed to a range of 4% to 4.25%.

Update 2:

The Hanover eventually secured the 20% upsized $150 million of reinsurance with this new Commonwealth Re 2023-1 catastrophe bond, while the notes were priced at the bottom of initial spread guidance, at 4%.

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