Hypatia Ltd. (Series 2023-1)

This is the second Hypatia catastrophe bond to be sponsored by Convex Group, the specialty insurance and reinsurance company founded by Stephen Catlin.

With this Hypatia Ltd. Series 2023-1 issuance, Convex is seeking $100 million or more in retrocessional reinsurance to protect its reinsurer Convex Re against industry losses from US named storms and earthquakes impacting the US or Canada.

The new cat bond will provide retrocessional reinsurance to the Convex Re reinsurance division, just like the first Hypatia cat bond as well.

The cedent will be Convex Re itself, the Convex group reinsurance entity, but the cat bond will also cover subsidiary entities such as Convex’s UK insurer, as the 2020 deal did.

We’re told that on behalf of cat bond sponsor Convex Re, Bermuda based special purpose insurer Hypatia Ltd. will issue a single tranche of Series 2023-1 cat bond notes, with a $100 million or greater target for the issuance.

The notes Series 2023-1 Class A notes that Hypatia issues will be exposed to losses from U.S. named storms, including Puerto Rico, D.C and the US Virgin Islands, and both U.S. and Canadian earthquake risks.

The retro reinsurance coverage will be on an annual aggregate basis, using a weighted PCS industry loss index trigger, and run across a three year term, just like the 2020 deal.

The currently $100 million of Series 2023-1 Class A notes that Hypatia Ltd. will issue, are set to provide Convex with aggregate industry loss based retro reinsurance, from an attachment point of $3.8 billion of losses, covering up to $4.3 billion, and with a after a $1 billion franchise deductible enforced, we are told.

The Class A notes will come with an initial attachment probability of 2.81%, an initial base expected loss of 2.52% and are being offered to investors with coupon guidance of 11.75% to 12.5%, sources said.

Convex’s Hypatia 2020 cat bond, which came in two tranches, matures this June, so this new issuance will go some way to renewing that cover it seems.

Update 1:

We’re now told the target size for this Hypatia Ltd. 2023-1 catastrophe bond issuance is for up to $150 million of notes to be issued, a potential 50% uplift from the launch.

At the same time, the price guidance has been lowered to between 10.5% to 11.75%, just over an 8% decline at the mid-points.

Update 2:

The price guidance was lowered again for Convex’s new Hypatia Ltd 2023-1 catastrophe bond, with an updated range of 9.5% to 10.5% offered to investors. At the updated mid-point that would be an almost 18% decline from the initial guidance middle.

Update 3:

Convex Group eventually secured its new Hypatia Ltd. 2023-1 catastrophe bond issuance to provide $150 million of protection, a 50% upsizing from the initial target, while the notes priced at a spread of 9.5%, which was roughly 22% below the mid-point of initial price guidance.