Fidelis seeks below guidance pricing for new $150m Herbie Re retro cat bond

Having been out in the catastrophe bond market with its latest issuance for a fortnight, specialty insurance and reinsurance company Fidelis Insurance has now lowered the guidance for the deal, aiming to secure the targeted $150 million of industry-loss triggered retrocession from the Herbie Re Ltd. (Series 2024-1) cat bond at pricing below the initial guidance.

Fidelis returned to the catastrophe bond market at the end of January, looking to secure $150 million or more in capital markets backed and industry-loss triggered retrocessional reinsurance with this Herbie Re 2024-1 cat bond deal.

This will be the fifth Herbie Re catastrophe bond transaction to be sponsored by Fidelis Insurance, since it first entered the cat bond market back in 2020 and as with all of its previous Herbie Re deals, this new issuance sees Fidelis looking to expand its sources of industry-loss triggered retro with the support of capital markets investors.

Herbie Re Ltd. will issue two tranches of Series 2024-1 cat bond notes, with the target size of the issuance still set at $150 million, we understand.

The notes will provide Fidelis with 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.

With no change to the size target, it seems Fidelis is very price focused with its latest catastrophe bond deal and reduced pricing is now being sought for each of the tranches of notes on offer.

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%.

We’re now told the Class A notes spread guidance has been lowered to a new range of 6.75% to 7.75%, at the mid-point of which would equate to a roughly 11% drop in pricing for these notes from the mid of initial guidance.

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

The Class B notes spread guidance has also been lowered, to a new range of 9.75% to 10.75%, which again at the mid-point of which would represent a roughly 8% drop in pricing from the mid of initial guidance.

So, it appears Fidelis is aiming to secure the issuance priced at levels below the initial guidance range, or at worst at the lowest end of initial spread guidance.

For a sponsor that has benefited from some small recoveries across two of its catastrophe bonds over the last year, this would be a strong result for Fidelis and another signal of the attractive price execution currently being achieved by cat bond sponsors.

We’ll keep you updated as 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.