Aspen Insurance Holdings Limited successfully secured its new Kendall Re Ltd. (Series 2021-1) catastrophe bond transaction at its upsized target of $300 million, while at the same time pricing fell more than 15% from the initial mid-point of guidance across each of the tranches of risk on offer.
The Kendall Re 2021-1 catastrophe bond was initially launched with a target size of $225 million earlier this month, but Aspen’s target then increased to a maximum of $300 million across the notes on offer, as we explained.
Now, we’re told that Aspen has successfully secured its upsized target for the notes.
Which means this Kendall Re 2021-1 catastrophe bond will provide Aspen $300 million of collateralized reinsurance, covering 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 across a three year term.
At the same time as securing the $300 million of protection, Aspen’s new catastrophe bond is just the latest issuance in 2021 to see its pricing fall well below initial guidance.
The now $150 million of Class A notes to be issued have 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% in the beginning. That price guidance dropped to 4% to 4.5%, but finally settled at the low-end of 4%, representing a roughly 16% decline in price from the initial mid-point.
The now also $150 million Class B tranche of notes, which have an initial expected loss of 3.32%, were first offered with coupon price guidance of 7% to 7.75%. But that subsequently fell to 6.25% to 7% and we’re told has now been fixed at the lowest-end at 6.25%, which represents a roughly 15% decline in price from the original mid-point.
It’s another significant price drop for a cat bond during its marketing, reflecting the still strong appetite from catastrophe bond funds and investors, as well as the efficiency of the capital markets to bring out a consensus on price across a book as it builds.
Meaning that with this new $300 million catastrophe bond, Aspen will more than replace its soon to mature $225 million of reinsurance from its Kendall Re Ltd. (Series 2018-1) transaction.
That 2018 cat bond completed to pay investors a multiple of 2.19 times expected loss (the EL was 2.4% initially).
This new 2021 Kendall Re cat bond will pay investors a multiple of 2.47 times expected loss for the Class A notes and 1.88 times for the Class B notes.
It’s a little challenging to make comparisons, as the 2018 cat bond was modelled by AIR, while the 2021 cat bond was modelled by RMS.
But it’s clear catastrophe bond multiples have declined over the last six months, as investor appetite is fuelling the recent keen price points achieved.