East Lane Re VII Ltd. (Series 2026-1)

This is the second cyber catastrophe bond to be sponsored by global re/insurer Chubb and sees the company looking to renew and perhaps build on its capital markets backed sources of cyber reinsurance protection.

Chubb is again using its Bermuda based special purpose insurer vehicle named East Lane Re VII Ltd. for its second cyber catastrophe bond sponsorship.

For the first time, this cyber cat bond features an annual aggregate tranche of notes, a form of coverage not seen in cyber cat bonds to-date with all having been occurrence in nature.

East Lane Re VII Ltd. is targeting issuance of a single tranche of cyber cat bond notes, to provide Chubb with a fully-collateralized and multi-year source of cyber reinsurance protection.

The initial target is to secure $150 million of limit with this second cyber cat bond for Chubb, in either occurrence or aggregate form.

The offering is split $150 million from a per-occurrence tranche of notes and $150 million from an annual aggregate tranche, but Chubb is seeking feedback from the market as to which tranche it will eventually place, Artemis understands.

Meaning that only one of the two tranches is expected to be issued and settled, as Chubb tests the capital markets appetite for aggregate cyber cat bond notes over occurrence based versions.

East Lane Re VII Ltd. is offering the Class A and Class B tranches of Series 2026-1 notes, one of which will be sold to investors and the proceeds used to collateralize cyber reinsurance agreements between the issuer and Chubb, to provide the protection.

This new cyber cat bond will provide Chubb with protection against widespread cyber loss events on an indemnity trigger basis over a two yearterm, from January 1st 2026 to the end of December 2027, with maturity due at the end of March 2028, sources said.

As with the first cyber cat bond from the company, the occurrence side of this cat bond will follow the structure of Chubb’s cyber reinsurance towers, in being split into North American and International, so this East Lane Re VII 2026-1 cyber cat bond features attachment metrics for each, as well as an overall figure.

A $150 million tranche of Class A notes would provide Chubb per-occurrence cyber reinsurance protection from an attachment point of $600 million of North American losses, or $400 million of International losses, with coverage from the notes spanning a $200 million layer of the tower for each.

The Class A occurrence notes have an initial attachment probability of 1.48% and an initial expected loss of 1.24%. The attachment probabilities are 0.56% for North America and 0.92% for International, while the expected losses are 0.43% for North America and 0.63% for International, we understand.

The $150 million of Class A Series 2026-1 notes are being initially offered for sale by East Lane Re VII Ltd. with spread price guidance in a range from 6.75% to 7.25%.

An also $150 million Class B tranche of notes will provide the annual aggregate cyber reinsurance protection and here there is no regional split. These notes will provide Chubb with aggregate protection from an attachment point of $600 million to an exhaustion point of $750 million, with a franchise deductible of $25 million to be cleared for a cyber loss event to qualify, we are told.

The Class B aggregate cyber cat bond notes will have an initial attachment probability of 1.86%, an initial expected loss of 1.57% and are being offered to investors with price guidance for a spread ranging from 8.5% to 9.25%.

Remember, we understand the plan is for only one of the tranches to be issued, as Chubb seeks feedback on the occurrence and aggregate tranche offerings from cat bond investors.

Update 1:

Chubb has opted to pursue sponsorship of the annual aggregate tranche of notes from this East Lane Re VII cyber cat bond, we understand. This will, if successfully priced and closed, make this the first aggregate cyber cat bond in history.

The Class B notes continue to be offered at $150 million in size, while at this stage their price guidance is also unchanged at between 8.5% and 9.25%.

Update 2:

Chubb secured it targeted $150 million of annual aggregate cyber reinsurance from this new East Lane Re VII cyber cat bond, we understand. This now becomes the first aggregate cyber cat bond in history.

The $150 million of Class B notes were priced to pay investors an initial risk interest spread of 8.5%, so at the low-end of guidance.