Global reinsurance firm Hannover Re has returned to the catastrophe bond market in search of a collateralized source of worldwide peak peril annual aggregate and industry loss based retrocessional reinsurance protection, with a $100 million or greater 3264 Re Ltd. (Series 2022-1) cat bond deal.
While this is a Series 2022-1 catastrophe bond transaction, the first we’ve got listed in our extensive Deal Directory, the issuance is scheduled to settle this year, but the notes come on-risk from early 2022.
This is the second catastrophe bond from Hannover Re’s Bermuda special purpose insurance vehicle 3264 Re Ltd.
In early 2020, Hannover Re sponsored a $150 million 3264 Re Ltd. (Series 2020-1) cat bond transaction that secured it multi-year retrocessional protection against certain losses from U.S. named storm risks, U.S. and Canadian earthquake risks and European windstorm risks, on an industry loss trigger basis.
For its second 3264 Re catastrophe bond, Hannover Re has expanded the range of covered perils significantly.
In fact, we’re told this as practically a worldwide all-natural peak perils cat bond deal, covering the majority of significant exposures for which a reliable industry loss index is available to construct a trigger from.
As a result, 3264 Re Ltd. is seeking to issue a single $100 million or greater tranche of Series 2022-1 Class A notes.
The notes will be sold to cat bond investors and the proceeds used to collateralize retrocessional reinsurance agreements between the SPI and Hannover Re.
The notes will provide a multi-year source of annual aggregate retro reinsurance, covering losses from U.S. named storms, thunderstorms, wildfires and winter storms, as well as U.S. & Canada earthquakes, European windstorms, Caribbean earthquakes, Japan typhoons and earthquakes, Italy earthquakes, Turkey earthquakes, Australian cyclones and earthquakes, and New Zealand earthquakes.
That’s most of the major peak peril risks that a global reinsurance company looks for retrocessional catastrophe protection for and in all cases the triggers are being furnished with data from either PCS or Perils, while the coverage runs across approximately three years to January 2025.
We’re told that the currently $100 million tranche of Class A notes will have an initial attachment probability of 14.27%, an expected loss of 7.95% and are being offered to cat bond investors with price guidance in a range from 17.5% to 18.5%.
That’s a relatively high-risk cat bond, but offering quite an attractive multiple, which of course would be needed to get investor support for an annual aggregate, retrocessional reinsurance deal, given the challenges in the retro market.
Hannover Re, coming to market with a retro cat bond, comes on the heels of global rival Swiss Re doing the same, as we were first to report last week.
With the catastrophe bond market flying in 2021 and records already being broken, the fact major reinsurers are finding its pricing attractive for retrocession bodes well for more of this type of issuance, as the cat bond market increasingly looks to support worldwide aggregate retro needs, as long as on a named peril basis.