Swiss Re Insurance-Linked Fund Management

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Hestia Re Ltd. (Series 2023-1)

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

  • Issuer: Hestia Re Ltd.
  • Cedent / sponsor: Kin Interinsurance Network
  • Placement / structuring agent/s: Howden Tiger Capital Markets & Advisory and Swiss Re Capital Markets are joint structuring agents and bookrunners
  • Risk modelling / calculation agents etc: AIR Worldwide
  • Risks / perils covered: Florida named storm
  • Size: $100m
  • Trigger type: Indemnity
  • Ratings: NR
  • Date of issue: Mar 2023

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

This is the second catastrophe bond to be sponsored by fast-growing direct-to-consumer insurtech Kin Insurance and the second from its Bermuda special purpose vehicle Hestia Re Ltd.

With this new Hestia Re Ltd. Series 2023-1 catastrophe bond, Kin Insurance is seeking at least $100 million of collateralized reinsurance to cover named storm and hurricane risks in Florida from the capital markets.

For its second cat bond, we’re told that Kin’s Bermuda-based special purpose insurer, Hestia Re Ltd., will seek to issue a single Class tranche of Series 2023-1 notes, preliminarily targeting $100 million in size, with these notes set to be sold to investors and the proceeds used to collateralize a reinsurance agreement between the SPI and ceding company.

The cedent is initially the Kin Interinsurance Network, but we’re told that Kin could add additional covered cedents should it launch further underwriting entities during the term of the cat bond.

The Hestia Re 2023-1 cat bond will cover Kin’s personal lines property book in Florida.

The notes will provide Kin with a three-year source of fully-collateralized Florida named storm reinsurance, on an indemnity trigger and per-occurrence basis, we understand.

The currently $100 million of Hestia Re Series 2023-1 Class A notes would attach at $110 million of losses and exhaust at $310 million, although potentially inure to other layers in Kin’s reinsurance tower (such as the FHCF coverage), we imagine (as its previous cat bond had).

We’re told that, based on a projection of its 2023 reinsurance arrangements, Kin expects the new Hestia Re cat bond will sit at approximately $531 million of losses and LAE in its tower, with RAP, FHCF and other private market reinsurance all inuring to the benefit of the new cat bond.

That gives the Hestia Re 2023-1 Class A notes an initial attachment probability of 1.36% and an initial base expected loss of 1.04%, while they are being offered to cat bond investors with price guidance in a range from 10.5% to 11.5%, sources said.

Giving the new cat bond notes the potential to have a multiple-at-market roughly double that of Kin’s first Hestia Re cat bond deal.

Update 1:

The target size for Kin’s second Hestia Re catastrophe bond remains at $100 million.

But the price guidance has been lowered, with a target of 10% to 10.5% now marketed to investors.

Update 2:

The price guidance has been reduced again for Kin’s latest catastrophe bond, with the Hestia Re Series 2023-1 notes now being offered to investors with spreads in a range from 9.75% to 10%.

Update 3:

We’ve now learned that Kin’s second Hestia Re catastrophe bond has been priced, with the spread fixed at the low-end of reduced guidance, at 9.75%, indicating a roughly 11% decline in pricing from the initial mid-point, but still an almost 9.4 times multiple of the initial expected loss to be paid to investors.

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