Convex gets $175m of retrocession from Hypatia 2026-1 catastrophe bond sponsorship

Convex Group, the expansive global specialty insurance and reinsurance underwriter, has now successfully secured $175 million of multi-peril retrocessional protection from its new and fourth Hypatia Ltd. (Series 2026-1) catastrophe bond sponsorship, pricing the coverage at the mid-point of guidance, Artemis understands.

Convex has previously sponsored three catastrophe bonds, a $300 million Hypatia 2020-1 deal, followed by a $150 million Hypatia 2023-1 issuance, and most recently a $150 million Hypatia 2025-1 cat bond roughly one year ago.

That cat bond backed retro coverage from 2023 matured recently, hence Convex’s return to maintain a capital markets backed and fully-collateralized source of protection within its retrocessional reinsurance arrangements.

Convex returned to the catastrophe bond market for its fourth Hypatia Ltd. catastrophe bond sponsorship earlier this month, with an initial target to secure $200 million of multi-peril retro covering peak North American perils.

As we reported in our first update on the offering, Convex lowered its target to between $150 million and $175 million of retrocession from this cat bond issuance, while the company set its sights on securing mid-guidance pricing for the tranche of notes on offer.

Now, we’ve learned from sources that Convex has successfully priced the Hypatia 2026-1 cat bond notes to provide it $175 million of multi-peril and multi-year retrocession, while maintaining the mid-guidance price point.

As a result, Hypatia Ltd. will now proceed to issue a $175 million tranche of Series 2026-1 Class A notes that will be exposed to industry losses from US named storms, including Puerto Rico, D.C and the US Virgin Islands, and both US, those territories and Canadian earthquake events.

These notes will provide Convex with annual aggregate retro protection, on an industry loss trigger basis, for major loss events caused by these perils, with the coverage set to run across a roughly three year term with maturity expected in May 2029.

What was at first a $200 million tranche of Series 2026-1 Class A notes were finalised at $175 million in size for Convex.

The Class A notes have an initial base expected loss of 2.26% and were first offered to cat investors with price guidance for a spread of between 4.75% and 5.25%. The notes were priced at the initial mid-point to pay investors a risk interest spread of 5%.

Comparing this to the recently matured Hypatia 2023-1 cat bond really shows how market pricing has moved in the last three years. Those notes had an initial base expected loss of 2.52% and priced to pay investors a spread of 9.5%, so the pricing is clearly lower for the protection in 2026.

Once this new Hypatia 2026-1 catastrophe bond issuance has settled, Convex will have $325 million of retrocession from the cat bond market in-force, from this and its 2025-1 deal.

You can read all about Convex’s fourth catastrophe bond, this Hypatia Ltd. (Series 2026-1)  transaction, and almost every other cat bond ever issued in the Artemis Deal Directory.