Lion III Re DAC

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Lion III Re DAC – At a glance:

  • Issuer: Lion III Re DAC
  • Cedent / sponsor: Assicurazioni Generali S.p.A.
  • Placement / structuring agent/s: GC Securities is sole structuring agent and joint bookrunner. Barclays Bank Ireland is sole Green structuring advisor and joint bookrunner. Natixis is sole green coordinator and joint bookrunner.
  • Risk modelling / calculation agents etc: AIR Worldwide
  • Risks / perils covered: European windstorm, Italy earthquake
  • Size: €200m
  • Trigger type: Indemnity
  • Ratings: NR
  • Date of issue: Jun 2021

Lion III Re DAC – Full details:

Italian headquartered insurance giant Assicurazioni Generali S.p.A. has returned to the catastrophe bond market for what will be its fourth transaction and the third to bear the Lion name.

This is also the first catastrophe bond to have specific green features added to it.

Lion III Re DAC is an Irish issuance vehicle registered to issue catastrophe bond notes on behalf of Generali.

It will issue a single tranche of notes, targeted at EUR 200 million and which we understand is unlikely to upsize and will be sold to investors and the proceeds used to collateralize reinsurance agreements between the issuing Lion II Re and Generali itself.

The notes will provide Generali with four years of reinsurance protection against certain losses from European windstorms and Italian earthquakes, on an indemnity trigger and per-occurrence basis, we’re told.

We understand the notes would attach after Generali suffers EUR 600 million of losses from a windstorm event striking Europe and EUR 400 million for an earthquake that strikes Italy, in both cases covering an EUR 200 million layer.

The EUR 200 million of notes on offer from the Lion III Re DAC catastrophe bond will have an initial expected loss of 2.99%, we understand and they are being offered to cat bond investors with spread guidance in a range from 4% to 4.5%.

Generali recognised the potential for insurance and reinsurance linked investments to have green or ESG (environmental, social and governance) credentials more than a year ago, revealing a framework it had developed for Green insurance-linked securities (ILS).

Now, the insurer is following this framework to bring its latest catastrophe bond to market, with three specific “green cat bond” features, we understand.

First, the Lion III Re cat bond will free up an equivalent amount of capital from Generali’s own balance-sheet to be used for projects as specified in the green ILS framework.

Second, the collateral will be invested specifically into green bonds issued by the EBRD.

Finally, the third green cat bond feature is related to reporting on the projects Generali will allocate balance-sheet capital to and the EBRD’s green bond reporting.

This is the first catastrophe bond issuance to have all three of these specific green ILS, or green catastrophe bond features and it shows that Generali is committed to leveraging the green ILS framework it has developed.

Update 1:

Price guidance spreads for the single tranche of notes has tightened and dropped down to 3.5% to 4%, we understand.

Update 2:

Pricing was finalised at the low-end of reduced guidance, with a coupon of 3.5%, representing a roughly 18% drop in price from the initial mid-point of guidance.

On closing, the EUR 200 million issuance size converts to approximately US $238.8 million.

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