Fidelis seeks $100m NA quake protection with new Herbie Re 2022-1 cat bond

Specialty insurance and reinsurance company Fidelis Insurance Holdings Limited is back in the catastrophe bond market with a $100 million or greater target for the new Herbie Re Ltd. (Series 2022-1) which is focused on earthquake risks in North America, Artemis has learned.

This is the fourth Herbie Re catastrophe bond transaction to be sponsored by the expansive underwriter and its first to be focused on a single type of peril.

With its latest cat bond, Fidelis is seeking at least $100 million of retrocessional reinsurance against losses from earthquakes in peak regions of North America, sources have said.

The firm’s Bermuda-based special purpose insurer Herbie Re Ltd. will seek to issue a single Class A tranche of Series 2022-1 notes, with a preliminary target for $100 million in size.

The notes will be sold to cat bond investors and the proceeds used to collateralize retro reinsurance agreements between the SPI and Fidelis Insurance Bermuda, the ceding company.

The single layer of reinsurance protection provided, will be structured on an annual aggregate and regionally weighted industry loss index basis, across a roughly four-year term and four individual annual risk periods to the end of December 2026.

We understand the notes will provide Fidelis with industry-loss based risk transfer protection against earthquake events in North America, or more specifically California, Oregon, Washington and Canada.

Previously, Fidelis’ cat bonds have covered worldwide perils, like its 2021 Herbie Re, or US named storm and quakes, like the two cat bonds sponsored in 2020 by the firm.

The $100 million of Class A notes will come with an industry attachment at $12.5 billion and exhaustion at $20 billion, we’re told, giving them a attachment probability of 4.11%, an expected loss of 3.37% and the notes are being offered with coupon guidance of between 9.25% and 10%.

We lack comparisons for earthquake cat bonds that are aggregate retro focused, so it’s hard to tell whether the multiple on offer is much higher than previous deals. But it’s certainly higher than occurrence quake cat bonds we’ve seen over the last few years, suggesting an uplift in spreads.

It’s good to see another cat bond hit the market and encouraging to see Fidelis continuing to build on its Herbie Re cat bond program.

We’ll keep you updated as this Herbie Re Ltd. (Series 2022-1)  catastrophe bond comes to market and you can read about this and every other cat bond deal in the Artemis Deal Directory.