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Aspen returns to cat bonds with $150m multi-peril Kendall Re 2018


Bermudian insurance and reinsurance group Aspen Insurance Holdings Limited is back in the catastrophe bond market for the first time in more than a decade, with a $150 million Kendall Re Ltd. (Series 2018-1) international multi-peril transaction.

The last time Aspen is listed as a sponsor of a catastrophe bond in our Deal Directory of over 500 transactions was back in 2007, with a California earthquake cat bond named Ajax Re Ltd., which had defaulted in 2009 due to the Lehman Brothers collapse.

Since then the re/insurer has not featured in the catastrophe bond market until now, with this Kendall Re 2018 transaction that has been launched to investors in recent days, sources explained.

Kendall Re Ltd. is a newly formed Bermudian special purpose insurer (SPI) established for issuing catastrophe bond notes for Aspen.

In this first issuance, Kendall Re Ltd. will issue a single currently $150 million Class A tranche of Series 2018-1 notes, which will be sold to investors and the proceeds used to collateralized reinsurance agreements between the issuance vehicle and the sponsor beneficiary.

That beneficiary of the cover will actually be Aspen Bermuda Ltd., we understand, which is the entity through which Aspen does much of its property catastrophe reinsurance underwriting.

The $150 million of Kendall Re 2018-1 notes will provide Aspen Bermuda with fully-collateralized retrocessional reinsurance protection against losses from a range of international perils, which include; U.S. named storm risks including Puerto Rico and the U.S. Virgin Islands, U.S. & Canada earthquake risks, U.S. severe thunderstorms, U.S. wildfires, U.S. winter storms, and European windstorms.

The coverage Aspen receives from this Kendall Re cat bond will be across a three-year term, on an annual aggregate basis and using weighted industry loss index triggers, with PCS providing all the trigger data aside from for European windstorm risks which is provided by PERILS AG.

We’re told the $150 million of Kendall Re 2018-1 notes will have an initial attachment probability of 3.02% and an initial expected loss of 2.4%. The notes are being offered to cat bond investors with coupon price guidance in a range from 5.5% to 6%.

It’s encouraging to see Aspen back in the catastrophe bond market, but given the reports about the sale process for the firm that is said to be underway it’s sure to raise more interest in the market than it perhaps would have otherwise.

Aspen may purely be back issuing its first cat bond in more than a decade to increase its third-party capital support because the ILS market offers efficiently priced access to fully-collateralized reinsurance protection at very competitive rates right now, or it could be getting its house in order by adding more retrocession to reduce its exposure to peak risks, in advance of a sale.

Either way, given the industry loss nature of the trigger (meaning the risk is linked to the industry’s loss experience not the sponsor) this cat bond is not directly linked to Aspen’s own underwriting prowess, meaning the investor community is certain to support this cat bond issuance as strongly as any other despite the uncertainty over Aspen’s future.

We understand the Kendall Re 2018 cat bond from Aspen is slated for completion later this month and we’ll update you should further information emerge.

You can read all about Aspen’s Kendall Re Ltd. (Series 2018-1) catastrophe bond and every other deal since the inception of the market in the Artemis Deal Directory.

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