Swiss Re Insurance-Linked Fund Management

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Hestia Re Ltd. (Series 2022-1)

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Hestia Re Ltd. (Series 2022-1) – At a glance:

  • Issuer: Hestia Re Ltd.
  • Cedent / sponsor: Kin Interinsurance Network
  • Placement / structuring agent/s: Swiss Re Capital Markets and TigerRisk Capital Markets & Advisory are joint structuring agents and bookrunners
  • Risk modelling / calculation agents etc: AIR Worldwide
  • Risks / perils covered: Florida named storm
  • Size: $175m
  • Trigger type: Indemnity
  • Ratings: NR
  • Date of issue: Apr 2022

Hestia Re Ltd. (Series 2022-1) – Full details:

This is a debut catastrophe bond from fast-growing direct-to-consumer insurtech Kin Insurance.

The ultimate beneficiary and cedent of the reinsurance cover that this Hestia Re Ltd. catastrophe bond will provide, is Kin Interinsurance Network, the insurtech’s policyholder-owned reciprocal exchange.

Hestia Re Ltd. is a newly registered Bermuda-based special purpose insurer that has been registered for the issuance of series of catastrophe bond notes.

For its first catastrophe bond issuance, Kin Insurance is seeking $100 million or more of reinsurance protection against losses to its personal property lines portfolio from named storms impacting its key state of Florida, across a three-year term, on an indemnity trigger and per-occurrence basis.

Hestia Re Ltd. will seek to issue a single Class A tranche of Series 2022-1 catastrophe bond notes and they will be sold to investors, with the proceeds of the sale used to collateralize reinsurance agreements between Hestia Re and ceding insurer the Kin Interinsurance Network.

We understand that the Series 2022-1 notes are being marketed as a $100 million tranche to investors, but we’re told there is room to upsize and that Kin would have the appetite to do so, if pricing and terms were deemed sufficiently attractive.

The Hestia Re Ltd. Series 2022-1 Class A notes will cover a layer of risk attaching at $125 million of losses and exhausting at $325 million, giving room for the transaction to double in size for Kin, if market conditions are conducive.

The currently $100 million of notes to be issued by Hestia Re Ltd. will have an initial attachment probability of 2.71% at the base case, while the initial expected loss is 1.97%. They are being offered to investors with coupon price guidance in a range from 8.75% to 9.5%.

Update 1:

Kin’s target for its debut catastrophe bond has increased, with the insurtech now seeking between $150 million and $200 million of reinsurance protection from the issuance.

At the same time, the pricing has moved to the upper-end of guidance, at 9.5%.

Update 2:

Kin’s first catastrophe bond eventually priced to provide the insurtech $175 million of collateralized catastrophe reinsurance protection, while the coupon was finalised at the top-end of initial guidance, to pay investors 9.5%.

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