Windmill III Re DAC (2024-1)

Dutch insurance group Achmea is back in the catastrophe bond market to sponsor what will be its fourth cat bond transaction, which appears to be a renewal of its last issuance from 2020.

Achmea sponsored what was issued as a €100m Windmill II Re DAC catastrophe bond to provide it broad European windstorm reinsurance protection back in June 2020 and that deal is scheduled to mature in early July 2024.

As a result, Achmea is back looking to replace this cover with a new catastrophe bond under a newly established issuer, Windmill III Re DAC.

Achmea Reinsurance Company NV, the group reinsurer, will play the role of ceding company, entering into a retrocessional agreement with the special purpose issuer to connect with the capital market investors backing this issuance, then providing reinsurance coverage down to Achmea’s main property insurance underwriting subsidiaries, we understand.

Windmill III Re DAC is seeking to issue a single tranche of Series 2024-1 Class A notes that are currently proposed as €75 million in size.

The Windmill III Re DAC notes will provide Achmea with a four-year source of collateralized reinsurance protection from the capital markets to cover certain European windstorm losses.

The covered area is broad and includes all the major European windstorm exposed countries. Once again, sources suggest this cat bond will also cover other windstorm related events for Achmea, such as convective storms, hail, and tornadoes.

The coverage from the cat bond notes will be on an indemnity trigger and per-occurrence basis, we are told.

The €75 million of Series 2024-1 Class A notes being offered by Windmill III Re DAC would attach their coverage at €500 million of losses, and exhaust coverage at €650 million we understand.

As a result, the notes have an initial attachment probability of 2.47%, an initial expected loss of 2.19% and are being marketed with price guidance in a range from 5.75% to 6.5%, sources said.

Update 1:

We’re told that the target size for this new cat bond for Achmea has been raised to €100 million.

At the same time and demonstrating the attraction cat bond investors have for diversification opportunities, the price guidance has dropped to a new range of 5.25% to 5.75%.

Update 2:

Achmea has now successfully priced the upsized €100 million of notes from this Windmill III Re DAC cat bond offering at the low-end of reduced guidance, to pay investors a spread of 5.25%, which represents a 14% drop from the original price guidance mid-point.