Ariel Re looks to upsize new Titania Re cat bond to $125m at lower pricing

Global reinsurance company Ariel Re is looking to slightly upsize its latest Titania Re Ltd. (Series 2023-1) catastrophe bond deal and, in a rare occurrence for recent months, the cat bonds price guidance has been reduced, so it now has the potential to price at or below the low-end of the initially marketed range.

Almost every catastrophe bond issued for some months now has priced either above guidance, or within it and those pricing on-target are only doing so more recently.

In a further sign of the stabilisation of the catastrophe bond market environment, Ariel Re is targeting pricing at the low-end of initial guidance, or even below that, signalling rising demand in the market, as well as more stable levels of capital being available.

This is Ariel Re’s third Titania Re cat bond deal and when it was launched to investors at the end of January, the reinsurance firm was seeking $115 million of multi-peril industry-loss triggered retrocession from the transaction.

Now, we’re told that Ariel Re’s appetite has increased slightly, but it seems the reinsurer is also very conscious of price and so isn’t looking to dramatically upsize this cat bond.

The target size has been increased to up to $125 million across the two tranches of cat bond notes that Titania Re will issue, we’re told.

To recap some of the cat bond deal’s details, Ariel Re is again seeking coverage for named storm and earthquake risks underwritten by its Syndicate 1910 at Lloyd’s.

This Titania Re 2023-1 cat bond will provide Ariel Re with retro coverage across a three-year term and three risk periods, to February 2026, against certain losses from U.S. 50 state, Puerto Rico, U.S. Virgin Islands, D.C. and Canada named storms and earthquakes.

There are two tranches of notes on offer, one to provide multi-peril aggregate protection, the second to provide single peril (named storm) per-occurrence coverage.

The Class A tranche of Series 2023-1 notes were first marketed at $65 million in size, but we’re told this is now targeted at up to $75 million. These notes will provide annual aggregate cover across both named storm and earthquake perils.

The Class A notes  have an initial base expected loss of 2.59% and were first offered to cat bond investors with spread guidance of 13% to 13.75%, but we’re now told that the price guidance has been lowered, to 12.75% to 13%.

Meanwhile, the Class B tranche remains $50 million in size, with this set to provide per-occurrence named storm only protection, across the same territories and over the same three-year term.

The Class B notes have an initial base expected loss of 3.82% and were first offered to investors with spread guidance in a range from 13.5% to 14.25%, but that guidance has also been lowered and narrowed to 13.25% to 13.5%, so again this could price at or below the bottom-end of initial guidance.

Ultimately, the pricing is perhaps more intriguing than the small upsize, as it does suggest a greater equilibrium being reached in the cat bond market, while also reflecting Ariel Re’s profile as a sponsor.

You can read all about this new Titania Re Ltd. (Series 2023-1) catastrophe bond from Ariel Re, as well as details on over 900 other cat bond transactions in the extensive Artemis Deal Directory.