Aspen Insurance Holdings Limited has returned to the catastrophe bond market for a renewal of its international multi-peril coverage from the capital markets, seeking to sponsor a $225 million Kendall Re Ltd. (Series 2021-1) transaction.
It’s going to be 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.
There are a few changes to the 2021 Kendall Re cat bond deal, as Aspen has updated the covered perils, changed the risk modeller and expanded the coverage across more of its global underwriting entities, we understand from sources.
The also $225 million Kendall Re Ltd. (Series 2018-1) cat bond is slated to mature this month, so this looks like a straight replacement.
The 2018 cat bond provided Aspen Bermuda with coverage against losses from 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 on an industry loss basis and featured AIR Worldwide as the risk modeller.
For this renewal issuance, Aspen is also seeing $225 million, perhaps more, of retrocessional reinsurance protection from two tranches of Series 2021-1 notes that Kendall Re Ltd. will issue.
The retro reinsurance protection will cover losses under Aspen’s Bermuda unit, as well as its Lloyd’s syndicate, UK company and US underwriting units, so covers losses across the entire group this time around.
Both tranches will 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.
So the range of covered perils has been reduced somewhat, while at the same time the new Kendall Re cat bond renewal will feature RMS as the risk modeller, instead of AIR.
The issuance currently features a $125 million tranche of Series 2021-1 Class A notes that have an initial expected loss of 1.62%, would attach at $475m of losses after a franchise deductible of $30m per event, and are being offered to cat bond investors with price guidance in a range from 4.5% to 5%, our sources said.
It also features a $100 million tranche of Class B notes, which have an initial expected loss of 3.32% and would attach at $325m, again after the same $30m franchise deductible per event, and are offered with coupon price guidance of 7% to 7.75%, we understand.
It’s encouraging to see Aspen returning for a scheduled renewal of its catastrophe bond backed reinsurance protection.
The fact this new deal has come out of the gates at the same size as the one scheduled to mature, also suggests that if investor appetite is strong enough, we could see Aspen upsizing its cat bond cover in 2021.