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Sakura Re Ltd. (Series 2022-1)

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Sakura Re Ltd. (Series 2022-1) – At a glance:

  • Issuer: Sakura Re Ltd.
  • Cedent / sponsor: Sompo International
  • Placement / structuring agent/s: Aon Securities is sole structuring agent and bookrunner
  • Risk modelling / calculation agents etc: AIR Worldwide
  • Risks / perils covered: U.S. (inc. DC, Puerto Rico & Virgin Islands) & Canada named storm and earthquake
  • Size: $150m
  • Trigger type: Industry loss index
  • Ratings: NR
  • Date of issue: Dec 2022

Sakura Re Ltd. (Series 2022-1) – Full details:

This is the first catastrophe bond to specifically provide coverage solely to the underwriting entities of Sompo International.

However, it is the second Sakura Re cat bond, after parent Sompo Holdings used the vehicle for a $400 million cat bond that covered its Sompo Japan entity and the International arm in 2021.

Bermuda domiciled Sakura Re Ltd. will offer a single tranche of Series 2022-1 Class A notes to cat bond investors, with $100 million or more set to be sold and the proceeds used to collateralize reinsurance agreements between the vehicle and Sompo International’s insurance and reinsurance entities.

The deal will provide Sompo International with US and Canadian specific property catastrophe reinsurance coverage, specifically against losses from named storms and earthquakes.

It’s an interesting structure though, as the Sakura Re 2022-1 cat bond will feature a dual trigger, to provide Sompo International with per-occurrence retro reinsurance protection for earthquake risks and annual aggregate for named storms.

That kind of dual-trigger approach has been used by the Japanese parent before, but is a less common cat bond structure for US-focused risks.

The $100 million of Class A notes being issued will feature a PCS industry loss index trigger and the retrocessional reinsurance protection will run across a three-year term, over three annual risk periods, to almost the end of 2025.

The Class A notes can attach for an earthquake event causing an industry loss of $45bn or higher on an occurrence basis, or for a named storm events aggregating to a $140bn industry loss index level.

The notes come with an initial attachment probability of 3.73%, an initial base expected loss of 2.96% and are being offered to cat bond investors with price guidance in a range from 12.5% to 13.5%.

Update 1:

We understand that Sompo International is now targeting up to $150 million of protection from this its first cat bond deal as sole sponsor, while the pricing has risen to the top-end of guidance, at 13.5%, we’re told.

Update 2:

Sompo International secured its upsized $150 million target for this Sakura Re 2022-1 catastrophe bond, while the coupon was finalised at the top-end of guidance, at 13.5%.

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