The second catastrophe bond from specialty insurance and reinsurance company Fidelis Insurance Holdings Limited may increase in size before close, as its target for the Herbie Re Ltd. (Series 2020-2) issuance has risen to as much as $300 million.
Fidelis returned to the catastrophe bond market earlier this month for its second transaction, looking to secure a $175 million additional slice of capital markets backed reinsurance coverage for its program from insurance-linked securities (ILS) investors.
The reception from the market has clearly been positive, no doubt helped by the rising appetites for cat bond investments, with the company now hoping to secure somewhere between $225 million and $300 million from the deal.
The new Herbie Re 2020-2 cat bond will provide Fidelis with additional collateralized reinsurance on an industry loss trigger basis against first-event losses from named storms or earthquakes across the United States and territories including Puerto Rico, the U.S. Virgin Islands, and District of Columbia.
Three tranches of notes are on offer and two of those, the less risky of the three, now look set to be upsized.
At launch the new cat bond featured a $75 million tranche of Class A notes with an initial expected loss of 2.07% that will provide four years of reinsurance protection.
This Class A tranche is now targeting from $100 million to $125 million of limit and having been initially offered to cat bond investors with price guidance of 6.75% to 7.5%, the price guidance has now been lowered significantly to a range of 6.25% to 6.75%, we’re told.
The second tranche featured $75 million of Class B notes with an initial expected loss of 3.61% and also set to provide four years of reinsurance coverage.
The Class B tranche is now also targeting $100 million to $150 million of limit for Fidelis and having originally been offered to investors with coupon price guidance of 9% to 9.75%, this has also been lowered to the bottom-end of guidance at 9%.
The final Class C tranche of notes remain at $25 million in size. These will provide Fidelis with reinsurance across just a two year term and have an initial expected loss of 7.59%.
The Class C notes were at first offered to investors with price guidance of 16.25% to 17.25% and this has also been reduced to 16% to 16.25%.
The latest sizing and price guidance suggests strong execution of this catastrophe bond issuance for Fidelis, with the deal looking likely to grow by as much as 71%, while at the same time the pricing looks set to come in below or at the bottom of price guidance.
Fidelis secured a $125 million source of collateralised multi-peril reinsurance protection with the Herbie Re Ltd. (Series 2020-1) cat bond deal earlier this year. This latest deal could increase that capital markets coverage significantly and we’ll update you when the final size and prices are available.