Kizuna Re III Pte. Ltd. (Series 2026-1)

This is the tenth catastrophe bond for Tokio Marine related underwriting entities that we have included in our Deal Directory and the seventh in the Kizuna Re series of catastrophe bond deals for the company.

Using its Singapore based special purpose reinsurance vehicle again, Kizuna Re III Pte. Ltd., Tokio Marine is seeking reinsurance protection against earthquake events in Japan from the capital markets.

Kizuna Re III Pte. Ltd. is planning to issue a single Class A tranche of Series 2026-1 notes, that will be sold to investors and the proceeds used to collateralize an underlying reinsurance agreement between the issuer and Tokio Marine & Nichido Fire Insurance.

The target size for this issuance is at least $100 million, we understand, while the reinsurance coverage will protect the sponsor against similar losses to its last issuance in 2024, which covered losses from Japanese earthquakes, including from any related impacts caused by shake, tsunami, fire, flooding, dam rupture and sprinkler leakage, while also covering such events as sea quakes and seismic volcanic disturbances or eruptions.

As with that 2024-1 cat bond issuance, this new Kizuna Re III 2026-1 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, presumably also again including certain reinsurance assumption between the cedant and group companies.

Tokio Marine’s coverage from the Kizuna Re III 2026-1 cat bond will be on a three-year rolling aggregate and indemnity trigger basis, across a five year term, as it’s most recent earthquake cat bonds have tended to be structured.

In other words it features three overlapping three-year aggregate risk periods, that run across the full five-year term of the reinsurance coverage. As a result, maturity for this new deal is slated for early April 2031, we are told.

Similarly to the 2024 Kizuna Re cat bond, this one will also feature 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 40bn, while it will cover a share of losses up to JPY 160 billion.

The $100 million of Series 2026-1 Class A cat bond notes that Kizuna Re III Pte. Ltd. is offering come with an initial attachment probability of 7.18% on a three-year basis (2.39% annualised) and an initial expected loss of 2.36% on a three-year basis (0.79% annualised), sources said.

We’re told the $100 million of notes are being offered to catastrophe bond investors with pricing guidance of 2.25% to 2.75%.

Update 1:

The target remains $100 million of reinsurance from this new Kizuna Re III 2026-1 cat bond for Tokio Marine, but the price guidance has been updated at the middle of the initial range, for a spread of 2.5% to be offered.