European insurer Achmea is aiming to secure slightly lower than anticipated pricing for its new Windmill II Re DAC (2020) catastrophe bond transaction, with the upsized EUR 100 million deal potentially set to come in with a slightly lower coupon now.
Netherlands headquartered Europe-focused insurance group Achmea returned to the catastrophe bond market at the beginning of this month, to sponsor the Windmill II Re 2020 transaction as a renewal of its soon to mature cat bond backed reinsurance protection from a 2017 issuance.
With this Windmill II Re DAC issuance, Achmea is targeting capital market backed reinsurance protection to cover two of its primary insurer subsidiaries against losses from European windstorm risks (which includes extratropical storms, convective storms, hail, tornadoes and other windstorm related events), on an indemnity trigger and per-occurrence basis across a four-year term.
The firm’s Achmea Reinsurance Company NV entity will take the role of ceding reinsurer, to interface with the capital market investors for this issuance, with the reinsurance coverage then provided on to two of Achmea’s main property insurance underwriting subsidiaries.
The offering began with a target size of EUR 80 million, but as we explained yesterday this was lifted by as much as 25%, with the single tranche of notes aiming for between EUR 80 million and EUR 100 million in size.
We’re now told that the Windmill II Re cat bond is likely to settle to provide Achmea EUR 100 million of catastrophe reinsurance protection.
The now likely to be EUR 100 million of cat bond notes being issued by Windmill II Re DAC, which have an initial expected loss of 2.56%, were initially offered to cat bond investors with coupon price guidance in a range from 4.25% to 4.75%, but that then declined as we reported yesterday to the lowest-end at a 4.25% coupon.
However, the latest update from our sources is that Achmea is hoping to get the protection at an even more favourable price, with the now EUR 100 million of notes offered with price guidance of 4% to 4.25%.
Should the insurer be successful this will be one of the only cat bonds to price below guidance of recent months, when most cat bonds have priced upwards.
But, as we explained yesterday, this is a rare European peril cat bond this deal will perhaps benefit from being a diversifier for investors, as well as the almost perma-low status of European catastrophe reinsurance pricing.