Orange Capital Re DAC (Series 2024-1)

This is the third Orange Capital Re catastrophe bond issuance to be sponsored by the NN Group, or Nationale-Nederlanden.

With this Orange Capital Re DAC 2024-1 transaction, the insurer is seeking to extend its capital markets backed multi-year European catastrophe reinsurance protection and this new deal will also serve to renew the reinsurance coverage of its Orange Capital Re DAC 2021-1 that matures at the end of this year.

NN Group is a life and property-casualty insurance underwriter based in the Netherlands, underwriting its risks largely in that country and some others close to it.

NN Group is once again using Ireland as the domicile to issue its third catastrophe bond, making use of the Orange Capital Re Designated Activity Company (DAC) for this Series 2024-1 cat bond issuance.

It’s a similar transaction to both of the other Orange Capital Re’s, as NN Group continues to add capital markets funding to its reinsurance. This 2024-1 cat bond has the same attachment point as the soon to mature 2021-1 issuance, underscoring the fact this is a renewal of sorts.

Orange Capital Re Designated Activity Company (DAC) will issue a single tranche of €75 million or more Class A Series 2024-1 catastrophe bond notes.

Those notes will be sold to investors and similar to the other deals, the collateral will be used to underpin a catastrophe reinsurance arrangement covering windstorm and severe thunderstorm risks in Belgium and the Netherlands.

As with the other Orange Capital Re cat bonds, the exposure is concentrated on the Netherlands with this deal, being NN Group’s main underwriting market.

The coverage will be on an indemnity trigger and per-occurrence basis, running across a just four year term, from January 2025 to the end of 2028, we understand, while maturity will be due on January 17th 2029. That’s a longer term than the previous three year Orange Capital Re deals, which is encouraging to see.

As with the previous deals, the cedent to this Orange Capital Re 2024-1 cat bond is NN Re again, which is the Nationale-Nederlanden internal reinsurance vehicle that helps NN Group manage its risks, hedge its portfolio and also access private reinsurance markets.

As a result, the reinsurance agreement will be between the issuer and NN Re, while NN Re reinsures NN Group entities.

We’re told the attachment point for the reinsurance from these Orange Capital Re 2024-1 Class A notes will be at €375 million, providing their coverage up to exhaustion at €450 million, suggesting no room for this deal to upsize.

The Series 2024-1 Class A notes issued by Orange Capital Re DAC will have an initial attachment probability of 3%, an initial expected loss of 2.7%, and are being offered to cat bond investors with spread price guidance in a range from 6.5% to 7%, sources told Artemis.

It’s a little challenging to compare with the previous Orange Capital Re cat bonds, given the 2021 deal was issued at above-par for structural reasons, while the 2023-1 notes were higher-risk. But the pricing does seem relatively aligned with last year’s deal, on a multiple-at-market basis at the mid-point.

Update 1:

We’ve learned that the price guidance has been lowered for this Orange Capital Re 2024-1 cat bond issuance for NN Group.

The size of the issuance remains unchanged at €75 million, but the notes are now being offered with updated price guidance in a range from 6.25% to 6.5%.

Update 2:

The price guidance has been lowered again, with a range of 6% to 6.25% now offered.

The size of the issuance remains the same at €75 million.

Update 3:

The Orange Capital Re 2024-1 cat bond notes were eventually priced at the bottom of reduced guidance, to pay investors a spread of 6%. The size of the issuance remained static at €75 million.