Umigame Re Pte. Ltd. (Series 2021-1)

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Umigame Re Pte. Ltd. (Series 2021-1) – At a glance:

  • Issuer: Umigame Re Pte. Ltd.
  • Cedent / sponsor: Tokio Marine & Nichido Fire Insurance Co. Ltd.
  • Placement / structuring agent/s: Aon Securities is sole structuring agent and bookrunner
  • Risk modelling / calculation agents etc: AIR Worldwide
  • Risks / perils covered: Japan typhoon, Japan flood
  • Size: $200m
  • Trigger type: Indemnity
  • Ratings: NR
  • Date of issue: Jun 2021

Umigame Re Pte. Ltd. (Series 2021-1) – Full details:

Tokio Marine & Nichido Fire Insurance Co. Ltd. has returned to the catastrophe bond market with a new Singapore domiciled issuance vehicle, through which it is seeking its first multi-peril cat bond, to provide a combined source of both Japanese typhoon and flood reinsurance protection from the capital markets.

The company has returned, with a new issuance vehicle domiciled in Singapore, Umigame Re Ptd. Ltd., looking to add a capital markets source of both typhoon and flood reinsurance from the capital markets.

Umigame Re Ptd. Ltd. will issue three tranches of notes, all of which will be sold to investors and the collateral used to support reinsurance agreements between the issuer and the sponsor Tokio Marine & Nichido Fire.

The reinsurance protection will run across four risk periods to provide almost four years of cover up to the end of March 2025, we understand.

All three tranches of notes will provide Tokio Marine with reinsurance against losses from Japanese typhoons or Japanese flood events, on an indemnity trigger and per-occurrence basis.

Because of the way the deal is structured, we understand that one tranche can provide first-event coverage to one layer of the insurers reinsurance tower, or second and subsequent event coverage to another.

Umigame Re will issue a $100 million Class A-1 tranche of notes that will provide first-event typhoon or flood protection to a higher layer of the reinsurance tower, attaching at JPY 400 billion.

This tranche of Class A-1 notes have an initial expected loss of 1.31% and are being offered to cat bond investors with price guidance in a range from 2.5% to 2.75%, we’re told.

A $50 million Class B tranche of notes will provide typhoon and flood protection across a lower layer of the reinsurance tower, attaching at JPY 220 billion.

This Class B tranche of notes will have an expected loss of 3.14% and are being offered to cat bond investors with price guidance in a range from 5% to 5.75%, we understand.

The final currently $50 million Class A-2 layer are the ones that can provide coverage to either layer of the reinsurance tower, in offering additional first-event coverage to the higher layer attaching at JPY 400 billion, or second and subsequent events affecting the lower layer at JPY 220 billion.

The Class A-2 notes have an initial expected loss of 1.32%, which brings together both the coverages this layer offers we understand, and are being offered to investors with coupon price guidance in a range from 2.75% to 3%.

Update 1:

Price guidance has been revised lower across all the tranches.

The Class A-1 notes are now marketed with guidance of 2.25% to 2.5%, Class B with guidance of 4.75% to 5%, and Class A-2 with guidance of 2.5% to 2.75%.

Update 2:

Pricing was finalised for all three tranches at the bottom-end of reduced guidance.

So the Class A-1 notes priced with a coupon fixed at 2.25%, Class B at 4.75%, and Class A-2 at 2.5%.

That represents a roughly 14%, 12% and 13% drop in price from each tranches initial mid-point of guidance, so an average price decline of around 13% while marketing.

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