Fidelis gets $150m Herbie Re 2024-1 index cat bond with significant price reduction

Fidelis Insurance has now finalised its latest catastrophe bond Herbie Re Ltd. (Series 2024-1) to provide the originally targeted $150 million of industry-loss triggered retrocession, but at significantly reduced pricing as the spreads fell to the bottom of the twice reduced range.

Fidelis ventured back to the catastrophe bond market at the end of January, with a $150 million target for industry-loss triggered retrocessional reinsurance with this Herbie Re 2024-1 cat bond deal.

It is the fifth Herbie Re catastrophe bond transaction to be sponsored by Fidelis Insurance since it first entered the cat bond market back in 2020.

As with all of its previous Herbie Re deals, now priced, this new issuance expands Fidelis’ sources of industry-loss triggered retrocession, with the support of capital markets investors.

The pricing is now finalised and the significant price reductions that were being sought have now been achieved, as this issuance was met with strong investor appetite, Artemis can report.

Herbie Re Ltd. will issue two tranches of Series 2024-1 cat bond notes to provide Fidelis $150 million of annual aggregate and regionally weighted industry-loss based risk transfer protection, for the perils of US named storm and US earthquake risks, over an almost four year term, to the end of 2027 and the aggregate industry loss structure features a $20 million franchise deductible.

The $100 million Class A tranche of notes come with an initial expected loss of 2.92% and were first offered to cat bond investors with spread guidance in a range from 7.75% to 8.5%.

The Class A notes price guidance was then lowered to between 6.75% and 7.75%, before being lowered again (as we reported) to a range of 6% to 6.75%.

We’re now told the final pricing for these Class A notes is at the bottom of the twice reduced range, for a spread of 6%, representing a roughly 26% drop in price for these notes.

The second $50 million tranche of Class B notes are the riskier layer of notes, with an initial expected loss of 4.51% and were initially offered to cat bond investors with spread guidance in a range from 10.75% to 11.5%.

The Class B notes price guidance was then lowered to between 9.75% and 10.75% at the first update and then at the second update this was dropped further, to an updated range of 9% to 9.75%.

We’ve now learned that the final pricing for the Class B notes has been fixed at the bottom end of that twice reduced range, for a spread of 9% to be paid, representing a 19% drop in price for these notes.

These are significant price reductions while this Herbie Re 2024-1 cat bond was marketing, reflecting a particularly strong investor appetite for this deal and resulting in relatively low multiples-at-market set to be paid.

Which, as we said, provides another signal of the attractive price execution currently being achieved by cat bond sponsors.

But, it’s important to note that, with these industry-loss triggered cat bonds and other industry-loss warranty (ILW) structures, pricing has softened considerably over the last few months and we’re also told that there has been a glut of capital targeting index deals, from a combination of maturities and fresh capital raised for strategies with a focus on index-trigger ILS investments.

Read all about this Herbie Re Ltd. (Series 2024-1)  catastrophe bond comes to market and you can read about this and every other cat bond deal in the Artemis Deal Directory.