Generali targets EUR200m Lion III Re “green cat bond”

Italian and global insurance giant Assicurazioni Generali S.p.A. is back in the catastrophe bond market with its fourth issuance, a EUR 200 million Lion III Re DAC cat bond through which it is seeking collateralized catastrophe reinsurance while adding “green” features to a cat bond issue.

It’s Assicurazioni Generali’s first cat bond issuance since 2017, it’s fourth in total, and marks a renewal of that also EUR 200 million Lion II Re DAC deal, although covering fewer perils as European flood coverage has been dropped for this new iteration of the Lion catastrophe bond.

It’s also the first cat bond from the insurer, in fact the first cat bond we’ve listed, to have a number of specific green credentials, as Generali looks to bring greater sustainability to cat bond issues, to make the resulting investment more ESG appropriate for investors.

Lion III Re DAC is an Irish issuance vehicle registered to issue catastrophe bond notes on behalf of Generali.

It will issue a single tranche of notes, targeted at EUR 200 million and which we understand is unlikely to upsize and will be sold to investors and the proceeds used to collateralize reinsurance agreements between the issuing Lion II Re and Generali itself.

The notes will provide Generali with four years of reinsurance protection against certain losses from European windstorms and Italian earthquakes, on an indemnity trigger and per-occurrence basis, we’re told.

We understand the notes would attach after Generali suffers EUR 600 million of losses from a windstorm event striking Europe and EUR 400 million for an earthquake that strikes Italy, in both cases covering an EUR 200 million layer.

The EUR 200 million of notes on offer from the Lion III Re DAC catastrophe bond will have an initial expected loss of 2.99%, we understand and they are being offered to cat bond investors with spread guidance in a range from 4% to 4.5%.

Generali recognised the potential for insurance and reinsurance linked investments to have green or ESG (environmental, social and governance) credentials more than a year ago, revealing a framework it had developed for Green insurance-linked securities (ILS).

Now, the insurer is following this framework to bring its latest catastrophe bond to market, with three specific “green cat bond” features, we understand.

First, the Lion III Re cat bond will free up an equivalent amount of capital from Generali’s own balance-sheet to be used for projects as specified in the green ILS framework.

Second, the collateral will be invested specifically into green bonds issued by the EBRD.

Finally, the third green cat bond feature is related to reporting on the projects Generali will allocate balance-sheet capital to and the EBRD’s green bond reporting.

This is the first catastrophe bond issuance to have all three of these specific green ILS, or green catastrophe bond features and it shows that Generali is committed to leveraging the green ILS framework it has developed.

These features could expand the range of investors interested in allocating to insurance-linked securities (ILS) such as catastrophe bonds, especially given the wave of demand for ESG appropriate investment opportunities.

It’s good to see this progress in making catastrophe bonds greener and we expect other sponsors will look to develop their own methods for adding more sustainability to cat bonds and making them a more ESG friendly investment opportunity.

You can read all about this new Lion III Re DAC catastrophe bond and every other cat bond ever issued in the Artemis Deal Directory.