Orange Capital Re DAC (Series 2021-1)

This is the first catastrophe bond issuance for the NN Group, or Nationale-Nederlanden, which is seeking to tap the capital markets for multi-year European catastrophe reinsurance protection with this Orange Capital Re DAC transaction.

NN Group has opted to use Ireland as a domicile, possibly for Solvency II reasons, and has established Orange Capital Re Designated Activity Company (DAC) there for the issuance of catastrophe bond series and notes.

The sponsor or ceding company for this cat bond is actually NN Re, which is the Nationale-Nederlanden internal reinsurance vehicle.

Orange Capital Re (DAC) will look to issue a single EUR 75 million (approx. US $85m) tranche of Series 2021-1 Class A notes that will be sold to catastrophe bond investors and the proceeds used to collateralise reinsurance agreements between the issuer and NN Re.

The notes issued will provide NN Group with a source of multi-year collateralised reinsurance against losses from European windstorms and severe thunderstorms, but the covered area is said to be just the Netherlands and Belgium, so not a full Europe-wide cat bond.

The reinsurance protection will be afforded on an indemnity trigger and per-occurrence basis, with coverage running across a three-year period to early January 2025, we understand.

The single EUR 75 million tranche of Class A notes will have an initial expected loss of 2.02% and the notes are being offered to cat bond investors with price guidance in a range from 3.25% to 3.75%.

One point of interest, sources told us the notes are offered at above-par, at 101.115, which is interesting as it effectively lowers the coupon slightly. We can’t confirm why this is the case, but it’s presumed to be structural and possibly related to the use of EBRD collateral.

Update 1:

The first catastrophe bond issuance for the NN Group did not upsize, with the Orange Capital Re DAC transaction remaining at EUR 75 million.

The price guidance narrowed towards the lower-end of guidance, at 3.25% to 3.5%.

Update 2:

NN Group’s first Orange Capital Re DAC catastrophe bond transaction has now been priced, with the EUR 75 million (US $85m) of notes finalised with a 3.25% coupon, so pricing it at the low-end of initial guidance.