Galileo Re Ltd. (Series 2026-1)

AXA XL has returned to the catastrophe bond market for additional fully collateralized retrocessional reinsurance protection, with a Galileo Re Ltd. Series 2026-1 issuance that we understand was relatively privately marketed and placed.

This more privately offered Galileo Re Series 2026-1 cat bond is less typical for the sponsor, but perhaps reflects its appetite to capitalise on pricing conditions in the capital markets to lock-in additional hedging capacity.

AXA XL has utilised its typical Bermuda based special purpose insurer for this catastrophe bond, with Galileo Re Ltd. the structure used to issue the notes, we are told.

Galileo Re Ltd. offered a single Class A tranche of Series 2026-1 cat bond notes to investors, with the proceeds to be used to collateralize a retrocessional reinsurance agreement between the issuer and the ceding company, which we understand to be XL Bermuda Ltd.

AXA XL’s other recent cat bonds have also provided protection to other underwriting entities, such as its Lloyd’s syndicate and other specialty re/insurance entities of the company, so it’s possible this Series 2026-1 issuance does as well.

We don’t know too much about the coverage these notes will provide, given the privately placed nature of the cat bond deal.

But we are told they feature an industry loss index trigger, which would make sense given that is how AXA XL tends to access limit from the cat bond market.

We do not know if they are occurrence or aggregate, in form of coverage, or what perils they will cover for the re/insurer. AXA XL’s cat bonds have covered North American peak perils in some cases, but in others they have featured European and further afield peak catastrophe exposure as well, so it’s hard to know at this time.

The $67.5 million of notes that are now set to be issued will provide AXA XL with industry loss based retrocessional protection over an almost two year term, with maturity due in early June 2028, sources said.

The $67.5 million of Galileo Re 2026-1 Class A notes were priced to pay investors an initial risk interest spread of 6%, we are told.

Update:

We’ve now learned that this Galileo Re Ltd. Series 2026-1 catastrophe bond for AXA XL was particularly innovative and brought a new peril to market for the first time.

Sources have told us that the $67.5 million of Class A notes that were issued provide a shared single limit of retro protection for AXA XL, across both US named storm risks and US terrorism risks.

Which means this Galileo Re Series 2026-1 catastrophe bond is the first ever to provide a sponsor with protection against terrorism events in the United States.

It is also the first pure terrorism cat bond to cover the risk on an industry-loss trigger basis, all the rest of the terrorism cat bonds having used indemnity triggers in the past for their sponsors.

As a result, this is the first cat bond to utilise PCS’ Global Terror Index, as the industry-loss event data provider and reporting agent.

It’s worth also noting that PCS’ Global Terror Index has a TRIA qualifier, in that for a loss to be designated it must be certified as a terrorism event under the Terrorism Risk Insurance Act (TRIA).

The US hurricane was modelled by Verisk using its AIR risk model, while the US terrorism risk was modelled by Moody’s using its RMS risk model.

That’s also notable as a rare case of two different expert risk modelling firms collaborating on a cat bonds single limit of coverage.

It was also the first use of the RMS terrorism risk model for US exposure within a cat bond issuance as well.

We’ve also learned that the $67.5 million of Galileo Re Series 2026-1 catastrophe bond notes had an initial combined expected loss of 2.16%, while we had previously reported that it priced to pay investors a spread of 6%.

In addition, we now know this was issued under Rule 4(a)(2) of the US Securities Act, as a private placement. Although we suspect the notes may have been made 144a eligible on settlement, which is often the case.