Aspen aims to upsize Kendall Re 2021 cat bond to $300m, at lower pricing

Aspen Insurance Holdings Limited has increased its target size for its latest catastrophe bond, with the company now aiming to secure $300 million of collateralized reinsurance protection from the Kendall Re Ltd. (Series 2021-1) transaction, while pricing has been reduced across the deals tranches.

As a result, it looks as if Aspen will upsize the amount of reinsurance protection it benefits from through cat bonds with this third visit to the cat bond market in the firms history.

This is Aspen’s second cat bond under the Kendall Re program and the third issuance from the company we have listed in our Deal Directory, with the first having been a 2007 California earthquake cat bond named Ajax Re Ltd., which had defaulted in 2009 due to the Lehman Brothers collapse.

The Kendall Re 2021-1 catastrophe bond was launched with a target size of $225 million earlier this month, but we’re now told Aspen is aiming to secure $300 million of protection from it, so more than replacing the soon to mature $225 million Kendall Re Ltd. (Series 2018-1).

As well as increasing the amount of capital markets backed reinsurance protection it receives from the Kendall Re cat bond program, Aspen has also expanded the coverage in its latest cat bond deal, with an update to the covered perils, a change to the risk modeller and expansion of the coverage across more of its global underwriting entities.

The two tranches of Series 2021-1 notes that Kendall Re Ltd. will issue are set to provide the sponsor Aspen with retro reinsurance protection covering losses under Aspen’s Bermuda unit, as well as its Lloyd’s syndicate, UK company and US underwriting units.

Both tranches are set to be exposed to losses from US named storms, including Puerto Rico, the US Virgin Islands and DC, as well as US and Canada earthquake, plus European windstorms on a weighted (state/county/Cresta) industry loss and annual aggregate basis.

At its launch, the Kendall Re 2021-1 catastrophe bond issuance featured a $125 million tranche of Series 2021-1 Class A notes, with an initial expected loss of 1.62% and were being offered to cat bond investors with price guidance in a range from 4.5% to 5%.

Now, this Class A tranche is targeting anywhere from $125 million to $200 million of protection, but with updated price guidance now much lower at 4% to 4.5%, we’re told.

This issuance also featured a $100 million tranche of Class B notes at launch, with an initial expected loss of 3.32% and these were offered with coupon price guidance of 7% to 7.75%.

Now, the Class B tranche is targeting anywhere from $100 million to $175 million of protection for Aspen, we understand, while the price guidance has also been updated at a lower level of 6.25% to 7%.

The caveat is that Aspen is said to only be seeking $300 million from this issuance and it looks like it will settle for that in whatever mix the market appetite makes most efficient for the company, as long as each tranche meets those minimum sizes.

So Aspen looks set to grow its latest catastrophe bond and finalise its pricing at the bottom-end of initial guidance, or even lower, falling in the trend set through the first-quarter and beginning of the second in 2021, where almost every cat bond has priced below its initial mid-point of spread guidance.

You can read all about Aspen’s new Kendall Re Ltd. (Series 2021-1)  catastrophe bond and every other cat bond issued in the Artemis Deal Directory.