Nakama Re Pte. Ltd. (Series 2024-1)

Zenkyoren, the Japanese National Mutual Insurance Federation of Agricultural Cooperatives, has returned to the catastrophe bond market in search of more aggregate Japanese earthquake reinsurance protection from the capital markets.

For its 2024 cat bond, Zenkyoren has returned to Singapore to use its special purpose reinsurance vehicle to issue the notes.

Zenkyoren last sponsored a cat bond out of Singapore in 2021, then used its Bermuda SPI in 2023.

This year, we’re told that Nakama Re Pte. Ltd. will seek to issue a single tranche of notes, to raise at least $150 million in capital to collateralize reinsurance agreements between the issuer and cedent Zenkyoren.

Zenkyoren is targeting the Japanese earthquake reinsurance protection on a three-year aggregate, indemnity triggered basis, with the coverage set to run across a roughly five year term to end of March 2029, with three annual aggregate risk periods, each three-years in length, that overlap across that term.

As usual, we understand Zenkyoren will benefit from protection that includes coverage for losses from shake and related perils of earthquakes, including tsunami’s, fire, flooding and sprinkler leakage.

The targeted $150 million tranche of Class 1 notes have an attachment point of JPY 1.9 trillion of losses and cover a layer to JPY 2.15 trillion, which is the same layer as Zenkyoren’s 2023 cat bond covers. The notes also feature a franchise deductible of JPY 270 billion.

This gives the notes an initial annualised attachment probability of 0.82%, an initial annualised expected loss of 0.79% and they are being offered with spread guidance of 2.25% to 2.5%, we are told.

Update 1:

Price guidance for these notes has been updated, to a new range of 2.35% to 2.5%, suggesting investors are not prepared to keep softening pricing for catastrophe bonds that only pay a minimal excess spread.

Update 2:

These Nakama Re 2024-1 catastrophe bond notes were finalised at the targeted $150 million issuance size, with a spread of 2.35%, so priced within the lower-end of guidance.