Swiss Re Insurance-Linked Fund Management

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Totara Re Pte. Ltd. (Series 2023-1)

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Totara Re Pte. Ltd. (Series 2023-1) – At a glance:

  • Issuer: Totara Re Pte. Ltd.
  • Cedent / sponsor: New Zealand Earthquake Commission
  • Placement / structuring agent/s: Aon Securities is sole structuring agent and joint bookrunner. Swiss Re Capital Markets is joint bookrunner.
  • Risk modelling / calculation agents etc: RMS
  • Risks / perils covered: NZ earthquake, tsunami, landslide, volcanic eruption, hydrothermal, storm, flood
  • Size: NZ$225m
  • Trigger type: Indemnity
  • Ratings: NR
  • Date of issue: May 2023

Totara Re Pte. Ltd. (Series 2023-1) – Full details:

New Zealand’s state-owned residential property disaster insurance entity, Toka Tū Ake EQC, also known as the Earthquake Commission, has entered the catastrophe bond market for the first time, seeking NZ $250 million (around US $156m) of multi-peril reinsurance protection from the capital markets.

For its debut catastrophe bond, the New Zealand Earthquake Commission has turned to Singapore for the issuance, presumably benefiting from the countries ILS grant program to help lower the costs of this first deal.

Totara Re Pte. Ltd. has been established in Singapore as a special purpose reinsurance vehicle for the issuance of series of catastrophe bond notes.

For its first issuance, Totara Re Pte. Ltd. will issue a single tranche of Series 2023-1 Class A notes that will be sold to catastrophe bond funds and investors, with the proceeds used to collateralize a reinsurance agreement between the vehicle and the NZ Earthquake Commission.

It’s understood that the issuance is currently targeted at NZ $250 million in size, which is roughly US $156 million at today’s rate.

The notes are designed to provide the NZ EQC with a four year source of collateralized reinsurance protection to the end of May 2027, structured on an indemnity and per-occurrence basis.

A range of perils are covered, sources said, with the Totara Re cat bond set to cover the EQC against losses from earthquake, tsunamis, landslide, volcanic eruption, hydrothermal, storm, and flood events.

The subject business is all residential property and land related, but we’re told that for the perils of storm and flood only residential land losses are covered, not properties.

The notes can attach after NZ $2 billion of losses and would exhaust payouts at NZ $2.25 billion.

The NZ $250 million of notes will come with an initial attachment probability of 3.66%, an initial expected loss of 3.42% and we’re told their initial price guidance is in a range from 8% to 8.75%.

Update 1:

We’re now told that target size for this first Totara Re catastrophe bond from the NZ EQC is being presented as between NZ $225 million and NZ $250 million in the latest update so a slight chance it comes in a little smaller than the original target, but not a significant amount.

At the same time, we’re told that the notes are now being offered with fixed guidance at the top-end of 8.75%.

Update 2:

We’re told the Totara Re 2023-1 catastrophe bond has now been priced to provide the NZ EQC with a NZ $225 million source of reinsurance (approximately US $138m).

The pricing was finalised at the top-end of the initial guidance, to pay cat bond investors a spread of 8.75%.

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