Hannover Re secures 125% upsized $450m Acorn Re parametric cat bond

Hannover Re’s seventh catastrophe bond offering in the annual Acorn Re parametric US earthquake series of deals has now been successfully priced at the bottom of initial guidance, to secure a 125% upsized $450 million of reinsurance limit from the Acorn Re Ltd. (Series 2026-1) cat bond issuance, Artemis has learned.

Hannover Re came back to market with this new and now seventh Acorn Re parametric catastrophe bond earlier this month, initially seeking $200 million of risk transfer and reinsurance limit for the single named ceding insurer, Oak Tree Assurance Ltd. while also sourcing additional protection to cover other reinsurance deals it has entered into.

As we reported in a first update on this new cat bond, the offering size had initially been increased by 75% to seek $350 million of limit, while the price guidance was lowered.

Then, in our second update on the cat bond offering, the target size was further increased, with $450 million of parametric earthquake reinsurance limit being sought and at the same time the price guidance was reduced again.

Now, we’ve learned from sources that the notes were successfully priced at the end of last week, to secure the now 125% upsized $450 million of parametric earthquake reinsurance limit priced at the bottom of the initial guidance range.

Acorn Re parametric earthquake cat bonds have now been issued four years in a row, as this deal becomes an increasingly regular and annual feature of this time of year. Read about all seven Acorn Re issuances in our catastrophe bond Deal Directory.

We won’t repeat all the details of the cat bond in our updates on size and pricing, so be sure to visit the Deal Directory entry for more background on the transaction.

With the notes now priced and the deal finalised, Bermuda-based special purpose insurer (SPI) Acorn Re Ltd. will issue and sell a $450 million tranche of Series 2026-1 Class A cat bond notes to investors. The proceeds of the sale will fully-collateralize a parametric reinsurance agreement to fund protection for the Kaiser Permanente captive, Oak Tree Assurance, as well as for certain exposures in the covered area that Hannover Re has written for its cedent clients.

The notes will provide per-occurrence based parametric reinsurance protection against earthquakes that strike the U.S. west coast region across a three year term, with the main focus of the parametric reinsurance protection being earthquakes in California, but the parametric trigger grid or box structure covering neighbouring states as well.

What was initially a $200 million tranche of Acorn Re 2026-1 Class A notes were first increased to $350 million, before they increased again to $450 million in size terms, which is where the offering was finalised.

The Acorn Re 2026-1 Class A cat bond notes come with an initial expected loss of 0.78%.

They were first offered to cat bond investors with price guidance for an initial risk interest spread of between 2% to 2.25%, which was lowered at the first update to between 2% and 2.15% and then again to a range of 1.9% to 2% at the second update.

We’re now told the $450 million of notes have been priced to pay investors an initial risk interest spread of 2%, so not quite at the lowest-end of guidance but at the lowest-end of the initially offered range.

It’s another example of strong catastrophe bond price execution in the current softened reinsurance market environment, but perhaps encouraging the spread did not fall to the lowest-end as investors demanded a minimum rate of return for the risk they will be assuming.

We can compare the pricing to the Acorn Re 2025-1 cat bond from roughly one year ago, which had an initial expected loss of 0.96% and priced to pay investors a spread of 2.35%, so with a multiple-at-market of 2.45 times the EL.

These new 2026-1 notes from Acorn Re have now priced with a multiple-at-market of 2.56 times the expected loss, so actually slightly higher. That’s unlikely a reflection of any change in the pricing environment, we believe, more so a reflection of the lower EL risk level and investors minimum return requirements.

You can read all about this new Acorn Re Ltd. (Series 2026-1) transaction and every other catastrophe bond in the Artemis Deal Directory.