Titania Re Ltd. (Series 2024-1)

Bermuda based global reinsurance company Ariel Re has returned to the catastrophe bond market as it looks to secure additional capacity from the capital markets for retrocessional reinsurance to protect its Lloyd’s Syndicate 1910 operation.

This Titania Re 2024-1 issuance sees the company looking to issue a deal that was not completed earlier this year, when in May 2024 Ariel Re stepped back from completing the issuance reportedly due to market pricing conditions at the time.

Now, Ariel Re is back and while the transaction has some changes, in terms of risk levels, the overall mission continues to be to expand Ariel Re’s capital markets backed sources of retrocessional catastrophe reinsurance protection.

Once this new deal is issued it will be Ariel Re’s fourth in the Titania Re series and sees the company again using its Lloyd’s Syndicate 1910 as the ceding company, which is its main underwriting vehicle for its global reinsurance business.

Ariel Re is once again seeking coverage for the same peak perils of named storm and earthquake risk across the US, Canada and related territories.

Bermuda domiciled special purpose insurer (SPI) Titania Re Ltd. is targeting issuance of two tranches of Series 2024-1 notes, which will be sold to investors and the proceeds used to collateralize a multi-year source of retro reinsurance for Ariel Re, covering certain losses from U.S. 50 state, Puerto Rico, U.S. Virgin Islands, D.C. and Canada named storms and earthquakes.

Both tranches of Titania Re 2024-1 notes will provide Ariel Re with annual aggregate and industry loss triggered retro protection, over a three year term to November 27th 2027, we understand from sources.

The target size across the two tranches is for $175 million of retrocessional protection to be secured.

Titania Re Ltd. is looking to issue a $100 million or larger Class A tranche of Series 2024-1 notes that will have an initial attachment point at $3.065 billion of losses, with exhaustion set at $4.29 billion and a $166.5 million franchise deductible to be taken into account before losses can aggregate against them.

The Class A notes come with an initial attachment probability of 3.3%, an initial base expected loss of 2.47% and they are being offered to cat bond investors with price guidance in a range from 7.25% to 8%.

A targeted $75 million Class B tranche of notes are riskier, attaching at $2.55 billion of losses and covering a share up to the $3.07 billion level, this time with a $165.5 million franchise deductible enforced, we are told

The Class B tranche of notes come with an initial attachment probability of 4.71%, an initial base expected loss of 4.02% and they are being offered to cat bond investors with price guidance in a range from 10.5% to 11.25%.

As said, the risk metrics are a little different to the earlier issuance from May that did not get completed, which shows Ariel Re seeking to optimise its coverage for how its portfolio has developed since that date, we suspect.

Update 1:

The target size for this issuance has been raised by roughly 57%, with $275 million in retro now sought by Ariel Re from this Titania Re 2024-1 cat bond deal.

At the same time the price guidance has been lowered for each tranche of notes.

The Class A notes are now targeted for $150 million, with updated price guidance now at 6.5% to 7.25%.

The Class B notes are now targeted for $125 million, with their price guidance updated to 9.75% to 10.5%.

Update 2:

The target size for this issuance has been raised again, with between $275 million and $325 million in retrocession now sought by Ariel Re from this Titania Re 2024-1 cat bond deal.

At the same time the price guidance has been lowered a second time for each of the tranches of notes.

The Class A notes are now targeted for between $150 million and $175 million, with updated price guidance now at 6% to 6.5%.

The Class B notes are now targeted for between $125 million and $150 million, with their price guidance updated to 9.25% to 9.75%.

Update 3:

At final pricing, Ariel Re secured the roughly 86% upsized $325 million of retrocessional reinsurance from this Titania Re 2024-1 catastrophe bond deal.

The Class A notes were finalised at $175 million and priced for a spread of 6.25%.

The Class B notes were finalised at $150 million and priced for a spread of 9.5%.

Which means the Class A notes pricing fell approximately 18% from the initial guidance mid-point, while the Class B notes pricing fell approximately 13%, which alongside the upsizing represents a very strong result for Ariel Re on all fronts.