Fidelis secures upsized $150m Herbie Re cat bond at 5% price reduction

Fidelis Insurance Holdings Limited, the specialty insurance and reinsurance underwriter, has now successfully secured its latest Herbie Re Ltd. (Series 2021-1)  catastrophe bond at the upsized $150 million, while pricing of the notes fell by 5% below the initial mid-point of guidance.

For Fidelis, the worldwide multi-peril retrocessional reinsurance risk profile of its latest catastrophe bond has proven just as attractive to investors as more typical US peril deals getting issued around this time of the year.

As a reminder, Fidelis returned to the catastrophe bond market for its third transaction earlier this month, with a new Herbie Re cat bond through which the company is seeking to significantly expand the range of covered perils and territories included, to provide broader retrocessional reinsurance protection.

This third Herbie Re cat bond from Fidelis is one of the broadest, in terms of the range of perils and regions of the globe covered, making it almost a worldwide multi-peril, or all natural peak zone perils, deal.

When the transaction was launched, Fidelis was targeting $50 million of retro reinsurance protection from this Herbie Re 2021-1 cat bond.

But strong investor demand for cat bonds helped the transaction to triple in size, meaning Fidelis will benefit from $150 million of protection from the Herbie Re 2021-1 notes.

Herbie Re Ltd., Fidelis’ Bermuda-domiciled special purpose insurer (SPI), will issue a single $150 million tranche of Series 2021-1 Class A notes, the collateral from which will be used to fund annual aggregate and industry loss index trigger reinsurance for the sponsor, across a four-year term and four individual annual risk periods to the end of May 2025.

The transaction will cover losses from: North America (inc. Canada) named storm, North America (inc. Canada) earthquake, US severe thunderstorm, US wildfire, US winter storms, US Caribbean earthquake, Japan typhoon, Japan earthquake, Canada severe storm, Canada winter storm, European windstorm, Italy earthquake, Turkey earthquake, Australia earthquake, Australia tropical cyclone, NZ earthquake.

Each peril covered features a franchise deductible, with coverage caps in place for North America named storm and earthquake, as well as US Caribbean quake risks.

Making this cat bond a particularly “worldwide” transaction, demonstrating to major retro buyers that the catastrophe bond market can offer broad industry-loss triggered coverage for practically all the major insured peak peril zones through a single layer of notes.

The cat bond has now been priced and for Fidelis it represents another example of strong cat bond market execution.

The $150 million of Series 2021-1 Class A notes, with an initial expected loss of 7.32%, were initially marketed to investors with price guidance in a range from 17.75% to 18.5%.

That price guidance subsequently fell to a new range of 17.25% to 17.75% and we understand that at final pricing the coupon was eventually fixed at the low-end of reduced pricing, at 17.25%.

Which represents a roughly 5% decrease in pricing from the mid-point of initial guidance, which for a higher risk cat bond, covering a broad range of perils like this further evidences the appetite of investors for new cat bonds at this time.

Once this new cat bond comes into force, Fidelis will be the beneficiary of $550 million of capital markets backed, multi-year retro reinsurance protection from its three Herbie Re deals.

Fidelis’ new Herbie Re Ltd. (Series 2021-1) catastrophe bond is expected to settle next week. You can read about this and every other cat bond deal in the Artemis Deal Directory.