Fidelis seeks worldwide multi-peril cover from third Herbie Re cat bond

Fidelis has returned to the catastrophe bond market for its third transaction and with this currently $50 million Herbie Re Ltd. (Series 2021-1) deal the company is seeking to significantly expand the covered perils and territories included.

In fact, this third catastrophe bond from Fidelis will be one of the broadest, in terms of the range of perils and regions of the globe covered, making it almost a worldwide multi-peril deal, with practically all the major insurance and reinsurance industry peak perils included.

Specialty insurance and reinsurance company Fidelis Insurance Holdings Limited is seeking at least $50 million of retrocessional reinsurance protection from its third visit to the catastrophe bond market, we’re told.

Herbie Re Ltd., Fideli’s Bermuda-domiciled special purpose insurer (SPI), will look to issue a single tranche of Series 2021-1 Class A notes that 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 industry loss index basis, across a four-year term and four individual annual risk periods to the end of May 2025, sources said.

As said, this is a particularly wide-reaching catastrophe bond deal, with the coverage resembling a worldwide industry loss warranty (ILW).

The covered perils and regions included are: 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, while there are caps for coverage for North America named storm and earthquake, as well as US Caribbean quake risks.

PCS and PERILS are both being used as reporting agencies for this Herbie Re 2021-1 catastrophe bond, with the perils split across the two industry loss data aggregators.

The target is for just $50 million of coverage, but of course that could increase if investor demand allows.

The Series 2021-1 Class A notes will attach at $50 million of losses, we understand, giving them an initial attachment probability of 11.43% and an initial expected loss of 7.32%, while the notes are being offered to investors with price guidance in a range from 17.75% to 18.5%, we’re told.

That makes this a particularly risky catastrophe bond, but at the same time one that will likely be appealing to some investors given the broad exposure and as a result higher returns it will provide.

Given the wide-range of natural catastrophe perils covered and regions included, as well as the four-year tenure and higher risk level of this third Herbie Re catastrophe bond, it will be interesting to see how it is received by the cat bond investor base.

Cat bond sponsors have been keen to broaden the scope of worldwide multi-peril deals and this transaction could provide a marker for some other large retrocession buyers about what may now be possible in the catastrophe bond market.

We’ll keep you updated as this Herbie Re Ltd. (Series 2021-1) catastrophe bond comes to market and you can read about this and every other cat bond deal in the Artemis Deal Directory.