Kizuna Re III Pte. Ltd. (Series 2024-1)

This is the ninth catastrophe bond for Tokio Marine entities we have covered in our Deal Directory and the sixth in the Kizuna Re series of catastrophe bond deals.

Kizuna Re III Pte. Ltd. is seeking to issue a single Class A tranche of Series 2024-1 notes, that will be sold to investors and the proceeds used to collateralize underlying reinsurance agreements between the issuer and Tokio Marine & Nichido Fire Insurance.

The target size for this issuance is at least $100 million, we’re told, while the reinsurance coverage will be against losses from Japanese earthquakes, including losses from related impacts caused by shake, tsunami, fire, flooding, dam rupture and sprinkler leakage and covering such events as sea quakes and seismic volcanic disturbances or eruptions.

As with the Japanese insurers’ last catastrophe bond, this new Kizuna Re III 2024-1 cat bond will provide reinsurance coverage to a portfolio of Tokio Marine & Nichido Fire’s business, including commercial, personal and industrial property policies, personal accident, automobile losses, and certain reinsurance assumption between the cedant and group companies.

Coverage from this new cat bond will be on a three-year rolling aggregate and indemnity trigger basis, across a five year term.

This is the same as Tokio Marine’s other recent Kizuna cat bonds, where the transactions are structured with three, three-year aggregate risk periods, that overlap across the full five-year term of the reinsurance coverage. As a result, maturity for this new deal is slated for early April 2029.

We understand there is a franchise deductible per-earthquake event that qualifies under the terms of the deal of JPY 40 billion, while the attachment point for the first of the three-year risk periods is JPY 52.5bn, covering a share of losses up to JPY 232.5 billion.

It’s worth noting that the earthquake franchise deductible is higher than the JPY 25 billion from the 2021 Kizuna Re cat bonds, but the first attachment point is actually the same.

The $100 million of Series 2024-1 Class A cat bond notes that Kizuna Re III Pte. Ltd. will issue come with an initial attachment probability of 5.57% on a three-year basis (1.86% annualised) and an initial expected loss of 1.59% on a three-year basis (0.53% annualised), we understand

We’re told the $100 million of notes are being offered to catastrophe bond investors with pricing guidance of 2.75% to 3.25%.

The collateral from this cat bond issuance will be invested in a SOFR-based Sustainable Development Bond issued by the World Bank Group’s International Bank for Reconstruction and Development (IBRD), with the funds used in projects around the world to address developing country issues and climate change.

Update 1:

The size of this issuance has not changed, with $100 million of reinsurance still sought from the notes.

But the spread guidance has been lowered, with an updated range of 2.5% to 2.75% now offered.

Update 2:

Tokio Marine and Nichido Fire successfully secured the targeted $100 million of earthquake reinsurance with its new catastrophe bond.

The $100 million of Series 2024-1 Class A notes that Kizuna Re III Pte. Ltd. is issuing eventually priced with a risk spread of 2.75%, so at the low-end of the original guidance.