European insurer Achmea is hoping to increase the size of its new Windmill II Re DAC (2020) catastrophe bond transaction by as much as 25%, with the offering now targeting up to EUR 100 million (US $113m) of reinsurance protection for the company.
Dutch headquartered European market 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 was aiming to source roughly $90 million (EUR 80m) of 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 act as the ceding reinsurer to interface with the capital market investors for this issuance, with the reinsurance coverage then provided to two of Achmea’s main property insurance underwriting subsidiaries.
The offering target size has been lifted by as much as 25% we’re now told, with the single tranche of notes now expected to be between EUR 80 million and EUR 100 million in size.
The cat bond notes being issued by Windmill II Re DAC have an initial expected loss of 2.56% and were initially offered to cat bond investors with coupon price guidance in a range from 4.25% to 4.75%.
We’re now told that the guidance has been fixed at the lower-end of that range, with the notes set to pay investors a coupon of 4.25%.
Pricing at the lower-end is unusual in 2020, as the majority of new catastrophe bonds have priced towards the upper-end of guidance, or in some cases much higher in recent months, as cat bond market pricing has followed reinsurance pricing higher.
But, being 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.