Commonwealth Re Ltd. (Series 2025-1)

The Hanover Insurance Group, Inc. has returned to the catastrophe bond for what will be its third sponsorship under the Bermuda special purpose insurer named Commonwealth Re Ltd.

Using Bermuda-based special purpose insurer Commonwealth Re Ltd., The Hanover Insurance Group is seeking at least $150 million in US-wide multi-peril and multi-year reinsurance protection from the capital markets, on a fully-collateralized basis with this third cat bond issuance.

Commonwealth Re Ltd. will issue a single tranche of Series 2025-1 Class A notes that are designed to provide reinsurance to The Hanover for the perils of US named storm, earthquake, severe thunderstorm, winter storm and wildfire, we are told.

Protection will be on an indemnity trigger and per-occurrence basis, with the reinsurance running across three years from July 1st through to the end of June 2028, we understand.

Sources said that the proposed $150 million of Series 2025-1 Class A notes that Commonwealth Re is offering will have an initial attachment point at $1.1 billion of losses and exhaust their coverage at $1.25 billion in the reinsurance tower, or above that if the cat bond is upsized.

Which gives the $150 million or more in Class A notes an initial attachment probability of 1.13%, an initial base expected loss of 1.02% (which is subject to change should the cat bond grow and span a larger layer of the tower, we are told) and they are being offered to investors with price guidance for a spread of between 4% and 4.5%, we understand.

Update 1:

We are told that The Hanover’s target for its new Commonwealth Re Ltd. Series 2025-1 catastrophe bond sponsorship has been increased, with now between the initial target of $150 million and as much as $200 million of reinsurance limit sought.

At the same time the price guidance for the Class A notes has been lowered, to an updated range of 3.5% to 4%.

Update 2:

The Hanover secured the upsized $200 million of reinsurance limit from its latest Commonwealth Re Ltd. Series 2025-1 catastrophe bond, while the Class A notes were priced to pay investors an initial risk interest spread of 3.75%, so the mid-point of the revised guidance (below the initial guidance) and around a 12% decline in price from the initial mid-point that had been offered.