Nakama Re Ltd. (Series 2023-1)

Zenkyoren (the Japanese National Mutual Insurance Federation of Agricultural Cooperatives), one of the world’s largest buyers of catastrophe reinsurance protection, has returned to the insurance-linked securities (ILS) market with a new Nakama Re catastrophe bond, its first since September 2021.

This will be the thirteenth catastrophe bond directly sponsored by Zenkyoren that we have listed in our extensive Deal Directory.

Zenkyoren is using its Bermuda based special purpose insurer (SPI) Nakama Re Ltd. for its latest catastrophe bond issuance, having used a Singapore SPRV as issuer the last time it came to market.

Nakama Re Ltd. will seek to issue two tranches of notes, to raise at least $200 million in capital to collateralize reinsurance agreements between the issuer and cedent Zenkyoren, sources said.

The $200 million or more in capital will collateralize a source of Japanese earthquake reinsurance for Zenkyoren, on an indemnity trigger and annual aggregate basis, across a five-year term.

The annual aggregate nature of the protection is a departure from Zenkyoren’s last few cat bonds, as they have more typically feature a rolling three-year aggregate protection approach, over a five-year term.

A $50 million tranche of Class A notes would attach at JPY 1.9 trillion of losses, covering a layer to JPY 2.15 trillion, giving the notes an initial attachment probability of 0.84%, expected loss of 0.79% and these are being offered with spread guidance of 2.75%.

A larger $150 million tranche of Class B notes will sit lower down, attaching at JPY 935 billion and covering losses to JPY 1.15 billion, giving the notes an initial attachment probability of 1.7%, expected loss of 1.54% and these are being offered with spread guidance in a range from 4% to 4.5%, we’re told.

The multiples-at-market indicated by the price guidance are an increase on Zenkyoren’s last Nakama cat bond from 2021, but they do not reflect as large an increase as has been seen for US catastrophe risks coming to market so far this year.

Update 1:

Zenkyoren looks set to secure a larger than targeted slice of earthquake reinsurance with its new Nakama Re 2023-1 catastrophe bond.

The originally $50 million tranche of Class A notes are now pitched at up to $75 million in size, while, the larger originally $150 million Class B layer that is riskier, is now being pitched at up to $200 million in size, we understand, while the price guidance was reduced to a range of 2.5% to 2.75%.

At the same time, the Class A notes price guidance has now been reduced to a range of 2.5% to 2.75%, and the Class B notes price guidance has now been fixed at the lower-end of 4%, sources said.

Update 2:

In the end we’re told Zernkyoren settled for $225 million of quake reinsurance from its new Nakama Re 2023-1 catastrophe bond.

The Class A notes upsized to $75 million and were priced at the low-end of revised guidance, at 2.5%.

The Class B notes were settled at $150 million in size, while their pricing remained at 4%, so the low-end of initial guidance.