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Ariel Re returns for third Titania Re cat bond, a $115m 2023-1 issuance


Global reinsurance firm Ariel Re has returned to the catastrophe bond market for its third Titania Re deal, seeking $115 million of multi-peril industry-loss triggered retrocession, via a Titania Re Ltd. (Series 2023-1) deal.

ariel-re-logoAriel Re sponsored its first catastrophe bond in 2021, when it secured $150 million of retrocessional reinsurance protection from a multi-peril industry loss trigger Titania Re 2021-1 issuance at the mid-year.

The reinsurer quickly followed up with a second cat bond sponsorship that same year, securing a larger $175 million slice of retro cover, with a very similar Titania Re Ltd. (Series 2021-2) issuance in December 2021.

Now, returning for its third Titania Re cat bond, Ariel Re is again seeking coverage for the same peak perils of named storm and earthquake risk.

As with the previous two Titania Re catastrophe bonds, Ariel Re’s Syndicate 1910 is the ultimate ceding company, which is its main underwriting vehicle for its global reinsurance business.

Bermuda registered special purpose insurer (SPI) Titania Re Ltd.  will seek to issue two tranches of Series 2023-1 notes, that will be sold to investors and the proceeds used to provide Ariel Re with a multi-year source of retro reinsurance to cover certain losses from U.S. 50 state, Puerto Rico, U.S. Virgin Islands, D.C. and Canada named storms and earthquakes.

The cat bond will provide its coverage across a three-year term and three risk periods, to February 2026.

Ariel Re’s two previous Titania Re cat bonds had each only featured a single tranche of notes, providing annual aggregate protection.

This time, Ariel Re has two tranches of notes on offer in this Titania Re 2023-1 cat bond deal, one to provide multi-peril aggregate protection, the second to provide single peril (named storm) per-occurrence coverage.

Titania Re Ltd. will issue a Class A tranche of Series 2023-1 notes that are currently sized as $65 million, with this layer of protection structured on an annual aggregate basis, covering both the named storm and earthquake perils across the aforementioned territories.

It’s also interesting to note the inclusion of a carbon offset feature within this new cat bond from Ariel Re, as that will see the reinsurer looking to offset some of the carbon from housing rebuild and replacement after a qualifying catastrophe event occurs.

The Class A notes come with an initial attachment probability of 3.04%, an initial base expected loss of 2.59% and are being offered to cat bond investors with spread guidance of 13% to 13.75%.

A currently $50 million Class B tranche of Series 2023-1 notes will provide per-occurrence named storm only protection, across the same territories and over the same three-year term.

The Class B notes come with an initial attachment probability of 4.58%, an initial base expected loss of 3.82% and are being offered to investors with spread guidance in a range from 13.5% to 14.25%.

For a pricing comparison, the Titania Re 2021-2 notes are closest to the 2023-1 Class A notes, being multi-peril, which had an initial expected loss of 3.32% and priced to pay investors a spread of 6.5%.

It’s a little hard to compare, as we don’t know the details of the underlying industry loss index calculation, that could be weighted in some way, but it is clear the pricing is higher, with it indicated at around a doubling over the December 2021 cat bond deal.

It’s positive to see Ariel Re returning and looking to expand its cat bond coverage with this latest Titania Re deal.

The two-tranche, one multi-peril and one named storm only approach shows Ariel Re looking to more deeply embed the cat bond protection within its retro reinsurance arrangements, which in the current market environment is a positive step to see.

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.

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