Assicurazioni Generali S.p.A., one of the world’s largest insurers, has successfully closed the first catastrophe bond it has sponsored, Lion I Re Limited, to secure itself €190m of fully-collateralized European windstorm reinsurance protection at keen pricing.
The Lion I Re Ltd. cat bond will provide Assicurazioni Generali with €190m of European windstorm cover on an indemnity and per-occurrence basis over a three year period. The cat bond covers a portion of Generali’s losses across a wide swathe of Europe, named as Austria, Belgium, Czech Republic, Denmark, France, Germany, Ireland, Luxembourg, The Netherlands, Norway, Poland, Slovakia, Sweden, Switzerland and the UK.
The Lion I Re cat bond launched to offer a €150m tranche of notes to investors, but that upsized to a suggested €180m to €190m in size, before finally completing at the upper end of that range at €190m, an increase in size of 27%.
Price wise, the Lion I Re cat bond was initially marketed with price guidance of 2.5% to 3% but that range narrowed and was lowered to below the bottom of initial guidance, with the notes subsequently offered to investors with a coupon of 2.25% to 2.5%. At pricing and closing the Lion I Re cat bond notes will now offer investors a yield of 2.25%, which is a drop of 18% in pricing from the mid-point of initial guidance.
The €190m of Lion I Re Limited cat bond notes have been admitted for listing on the Bermuda Stock Exchange.
With the successful issuance of Lion I Re as its first catastrophe bond it has to be hoped that Generali will now look to the cat bond market as a core component of its reinsurance coverage for the future. The insurer has a large amount of property catastrophe exposure across Europe and it would make sense for it to leverage the capital markets to an increasing degree in order to further diversify its sources of risk capital in the future.
Also, Lion I Re is one of only a very few successful European windstorm indemnity cat bonds and the success of this issuance may also encourage other primary insurers to look to the cat bond market for reinsurance cover in the region.
Q1 2014 Catastrophe Bond & ILS Market Report – A Record Quarter
This report reviews the catastrophe bond and insurance-linked securities (ILS) market at the end of the first-quarter of 2014, looking at the new risk capital issued and the composition of the transactions completed during Q1 2014. Download your copy here.