Liongate Re DAC

This Liongate Re DAC catastrophe bond is designed to provide reinsurance protection against earthquakes in Japan on an indemnity and three-year aggregate basis for Japanese mutual Zenkyoren and earthquakes in Germany on a parametric trigger basis as well, which we believe may protect entities of the Sparkassen-Finanzgruppe.

At this stage, with information limited, we’re not 100% clear on the beneficiary of the German parametric earthquake protection, but suspect it might be for one or more of the intermediating insurance and reinsurance entities which are part of the Sparkassen-Finanzgruppe, as we’re not aware of Zenkyoren having any property catastrophe exposure in that country.

Liongate Re Designated Activity Company (DAC) has been established in Ireland to be the issuer for this first catastrophe bond through the structure, sources said.

Liongate Re DAC is aiming to issue $100 million of notes that will be sold to catastrophe bond funds and investors, while the proceeds from that sale will be used to collateralize the underlying reinsurance.

We’re told that there are two German re/insurance firms acting as intermediating and ceding entities for this first Liongate Re DAC catastrophe bond, while Zenkyoren is also a cedent.

First, Zenkyoren, the Japanese National Mutual Insurance Federation of Agricultural Cooperatives, is a ceding insurer to the deal and so will benefit from the collateralized reinsurance coverage the Liongate Re DAC cat bond will provide, we are told.

But facilitating that coverage is German reinsurance company Deutsche Rückversicherung, acting as an intermediating reinsurance entity, in turn facing off to a ceding reinsurance entity which is German held insurer SV Sparkassenversicherung, which in turn will face off to Irish entity Liongate Re DAC.

Both Deutsche Rückversicherung and SV Sparkassenversicherung are entities of the Sparkassen-Finanzgruppe, which is an association of savings banks, public insurance companies and other financial service providers in Germany.

So, it appears that the Japanese earthquake reinsurance protection is passed down this line to Zenkyoren, while the German earthquake reinsurance may actually be for the portfolios of one or both of the intermediating re/insurers or the Sparkassen-Finanzgruppe itself, although we cannot be certain at this time.

The currently $100 million of catastrophe bond notes that Liongate Re DAC will issue will provide Japanese earthquake reinsurance protection on a three-year aggregate and indemnity trigger basis, which is aligned with Zenkyoren’s other cat bond backed protection, such as from its recently completed Nakama Re 2025-1 deal.

It will also provide $100 million of per-occurrence parametric earthquake reinsurance covering Germany over a three year term, using a parametric box construction.

Maturity of the Liongate Re DAC notes will be scheduled for mid-April 2028, we understand.

The Japanese earthquake reinsurance protection from the notes would attach at JPY 2.15 trillion of losses and cover a layer to JPY 2.4 trillion, and also feature an aggregate franchise deductible of JPY 270 billion, which is all the same attachment and deductible metrics as Zenkyoren’s recent Nakama Re cat bond deal.

Meanwhile, we understand that the parametric trigger for the earthquake reinsurance protection for Germany will have a stepped-payout mechanism aligned with boxes, with different percentages of principal payable depending on the magnitude of an event. We’re told the minimum magnitude required of a quake to put the notes at-risk will be M5.3 or more.

The $100 million of cat bond notes Liongate Re DAC is offering will come with an initial attachment probability of 1.43%, an initial expected loss of 1.15% and have spread price guidance in a range from 3% to 3.5%, sources said.

Update 1:

We understand the target issuance size for this Liongate Re DAC catastrophe bond has been updated to between $90 million and the original $100 million of reinsurance limit that was sought.

At the same time the single tranche of notes have seen their price guidance updated at the top-end of the initial range, for a spread of 3.5%.

Update 2:

We’re now told that this Liongate Re DAC catastrophe bond has been priced and will provide the full target for $100 million of reinsurance limit for the beneficiaries.

In addition, we understand the notes were priced at the revised 3.5% spread, which was the top-end of initial guidance.