Hannover Re targets 75% upsized $350m of limit from new Acorn Re parametric cat bond

Hannover Re’s seventh catastrophe bond offering in the annual Acorn Re parametric US earthquake series of deals looks set to grow, as the target size for this issuance has been raised by 75% to now seek $350 million of limit from the Acorn Re Ltd. (Series 2026-1) issuance, sources have said.

Hannover Re returned 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.

These parametric catastrophe bonds, under the Acorn Re series, play a kind of dual role in protecting Oak Tree Assurance, a Vermont-based workers compensation captive insurer of the Kaiser Permanente group of health plan companies, while also providing a type of retrocessional reinsurance for Hannover Re to protect other reinsureds that might face losses under the cat bond’s trigger conditions.

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.

Bermuda-based special purpose insurer (SPI) Acorn Re Ltd. was initially offering a $200 million tranche of Series 2026-1 Class A cat bond notes to investors, but we’re now told the offering size has been raised 75% to $350 million.

The proceeds from the sale of the notes will collateralize underlying retrocessional reinsurance agreements between Acorn Re and Hannover Re and the reinsurer in turn then enters into reinsurance agreements with the Kaiser Permanente captive, Oak Tree Assurance, while also using the protection to cover any losses to its other reinsureds that have exposure in the parametric box.

The notes are designed to provide per-occurrence based parametric reinsurance protection against earthquakes that strike the U.S. west coast region, with that protection funded by the capital markets and running across a three year term from November 1st 2026 to the end of October 2029.

As with all the previous Acorn Re cat bond deals, the main focus of the parametric reinsurance protection remains earthquakes in California, but the parametric trigger  grid or box structure covers neighbouring states as well.

The parametric trigger is designed to provide a sliding scale payout structure, meaning different payout percentages are possible depending on the magnitude and location of earthquake loss events, starting at a 25% payout as a minimum.

What was initially a $200 million tranche of Acorn Re 2026-1 Class A notes are now sized at $350 million, as we said. The notes have an initial expected loss of 0.78% and were first offered to cat bond investors with price guidance for an initial risk interest spread of between 2% to 2.25%, but we’re now told that the price guidance range has narrowed to between 2% and 2.15%.

Which represents only a slight price decline, of around 2.4% from the initial to the updated mid-points of spread guidance, but being such a remote risk cat bond deal and with a thin spread from the start, that’s not surprising as investors do have minimum return requirements below which lower-risk cat bond investments just don’t make as much sense.

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