Hexagon IV Re Ltd. (Series 2025-1)

Covéa Group, the French mutual insurance society, is back in the catastrophe bond market targeting issuance of its fifth Hexagon cat bond.

With this latest issuance, the insurer is targeting expanded cover compared to its most recent 2023 cat bond, through the incorporation of coverage for hail and certain winter windstorm related perils, as well as one tranche that will provide aggregate protection, we understand.

Hexagon IV Re Ltd. is set to issue two tranches of Series 2025-1 cat bond notes that will be sold to insurance-linked securities (ILS) investors and the proceeds used to collateralize a reinsurance agreement between the issuer and Covéa Group entities.

At least €200 million of reinsurance is the target with this new Hexagon Re IV 2025-1 cat bond, to provide Covéa and its mutual insurers with fully-collateralized reinsurance cover against losses from windstorms, hail and certain other perils across France, Monaco and Andorra.

One tranche of indemnity and per-occurrence notes will provide the insurer with four calendar years of protection, while a second tranche will provide indemnity annual aggregate protection over a two calendar year term, we understand. The aggregate notes also cover a slightly smaller range of perils.

A targeted €150 million Class A tranche of notes will provide indemnity triggered per-occurrence protection for losses from windstorms, hail and other perils. Those other perils include certain winter storm related impacts such as snow-linked, we are told. The term of coverage will run from the start of 2026 until the end of 2029, so four years of coverage.

The Class A notes protection would attach at €625 million of losses, covering a share of losses to €1.025 billion, giving them an initial attachment probability of 4.28%, an initial expected loss of 2.97% and these notes are being offered to cat bond investors with price guidance for a spread of between 5.5% and 6%, sources said.

A targeted €50 million Class B tranche of notes will provide indemnity triggered annual aggregate reinsurance protection for losses from windstorms and hail events (so not including the other perils categories), we understand. The term of coverage for these aggregate notes will run from the start of 2026 until the end of 2027, so two years of coverage.

We’re told that the annual aggregate coverage terms feature a €200 million event deductible and €50 million cap per qualifying event.

The Class A notes protection would attach at €50 million of losses, covering a share of losses to €100 million, giving them an initial attachment probability of 1.47%, an initial expected loss of 1.16% and these notes are being offered to cat bond investors with price guidance for a spread of between 6.5% and 7%, sources said.

Given the event deductible and cap terms, it would appear these notes could only face principal losses after a second event qualified.

Update 1:

We’re told the target size for this Hexagon IV Re 2025-1 catastrophe bond issuance remains to source €200 million of reinsurance for Covea Group, but the price guidance has been lowered for both tranches of notes.

The Class A per-occurrence notes are now offered with a revised price guidance range of between 5% and 5.5%.

The Class B aggregate notes are now offered with a revised spread price range of between 6% and 6.5%.

Update 2:

Covéa Group has now raised the target size for this Hexagon IV Re 2025-1 catastrophe bond issuance to source €250 million of reinsurance protection, while the price guidance has been lowered further for each of the tranches of notes.

The Class A per-occurrence notes are now targeting €200 million in reinsurance and are being offered with a revised price guidance for a spread of 5%.

The Class B aggregate notes remain at their original size of €50 million, but are now offered with a revised spread price range of between 5.75% and 6%.

Update 3:

Covéa Group secured this Hexagon IV Re 2025-1 catastrophe bond issuance to provide the upsized €250 million of reinsurance protection, while the pricing was finalised at the bottom ends of guidance for both of the tranches of notes.

The Class A per-occurrence notes will settle to provide €200 million in reinsurance and are have been priced to pay investors a spread of 5%.

The Class B aggregate notes remained at €50 million, but priced to pay investors a spread of 5.75%.