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EQC secures NZ $225m of reinsurance with Totara Re cat bond


The New Zealand Earthquake Commission, or Toka Tū Ake EQC, has now priced its debut catastrophe bond issuance, with the Totara Re Pte. Ltd. (Series 2023-1) deal set to provide the insurer a NZ $225 million source of collateralized and multi-year reinsurance protection.

new-zealand-earthquake-commission-eqc-toka-tu-akeToka Tū Ake EQC, is the New Zealand state-owned residential property disaster insurance entity and as we reported earlier in 2023, the Earthquake Commission (EQC) had sharpened its focus on catastrophe bonds of late, exploring the potential to add them to its reinsurance program.

The EQC renewed a record $7.2 billion reinsurance tower in June 2022, providing plenty of scope for adding catastrophe bond coverage to it.

Then, the NZ EQC entered the catastrophe bond market for its debut sponsorship back at the middle of April.

As we reported at the time, the NZ EQC’s debut catastrophe bond will be issued out of Singapore, with the insurer set to benefit from the Singapore ILS grant program, to help in lowering some of the frictional costs of this first deal.

We’re hosting our ILS Asia 2023 conference in Singapore on July 13th this year. Please register here to attend the event.

Now, Artemis has learned that the Totara Re cat bond has been successfully priced and will provide the NZ EQC with NZ $225 million of reinsurance, which is just under US $138 million at today’s rate.

Singapore domiciled special purpose reinsurance vehicle Totara Re Pte. Ltd. will now issue the NZ $225 million of Series 2023-1 Class A notes to provide the NZ EQC with a four-year source of collateralized reinsurance protection to the end of May 2027.

The reinsurance coverage will be on an indemnity and per-occurrence basis, covering certain losses from earthquake, tsunamis, landslide, volcanic eruption, hydrothermal, storm, and flood events.

The original target issuance size at the launch of the Totara Re cat bond in April was NZ $250 million, so eventually it has been priced a little below that, but still a healthy slice of reinsurance from the cat bond market for the NZ EQC.

The Totara Re 2023-1 notes to be issued come with an initial expected loss of 3.42% and were initially offered with price guidance in a range from 8% to 8.75%, but the notes have now been priced at the top-end of 8.75%.

Which as we explained in an update on this cat bond earlier this week, is a healthy response from the cat bond investor community, to secure what they see as acceptable pricing for taking on what is a new risk for the catastrophe bond market, in New Zealand earthquakes and associated perils.

So another first-time cat bond sponsor successfully secures reinsurance from the ILS market with its debut issuance and another new peril comes to market.

Importantly, given the scale of the EQC’s reinsurance tower, there is plenty of scope for more to follow in years to come and for the cat bond market to begin to fill out more of certain layers of its reinsurance tower, as investors get comfortable with the risks and the EQC as a new sponsor in the market.

You can read all about this new Totara Re Pte. Ltd. (Series 2023-1) catastrophe bond and every other cat bond issuance since the market began in our extensive Deal Directory.

Register today for ILS Asia 2023, our next insurance-linked securities (ILS) market conference. Held in Singapore, July 13th, 2023.

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