Hiscox gets first cat bond in 21 years at upsized $125m, priced 10% below mid-point

Hiscox Group has now successfully secured its first catastrophe bond in over two decades upsized by 25% to provide $125 million in reinsurance cover, while the Ocelot Re Ltd. (Series 2023-1) cat bond notes priced around 10% below the mid-point of initial guidance.

Hiscox, the global personal, commercial and specialty lines insurance and reinsurance group, returned to the catastrophe bond market earlier this month with this Ocelot Re 2023-1 transaction.

It is Hiscox’s first cat bond sponsorship since April 2002, when it had brought the St Agatha Re Ltd. deal to market, which was notable for being the first catastrophe bond to directly protect a Lloyd’s syndicate.

When this Ocelot Re cat bond was first launched to investors, Hiscox was aiming to secure $100 million of peak peril aggregate retrocession reinsurance from the notes.

As we reported earlier this week, the target size for this issuance was increased by 25%, with $125 million of coverage then being sought from the Ocelot Re cat bond by Hiscox.

Artemis has learned that the Ocelot Re 2023-1 Class A notes have now been priced and Hiscox has secured its raised target for its first cat bond in 21 years.

As a result, Ocelot Re Ltd. will issue $125 million in Series 2023-1 Class A notes, that will provide Hiscox with a multi-year source of US and Canada named storm and earthquake retrocession structured on an annual aggregate and weighted PCS industry-loss trigger basis.

The retro reinsurance coverage will run across three annual risk periods, from calendar year 2024 through 2026.

At the same time as securing a larger than targeted amount of protection through this issuance, Hiscox has also successfully secured that protection at a lower than originally targeted rate-on-line.

The $125 million of Ocelot Re Ltd. Series 2023-1 Class A catastrophe bond notes that are being issued, come with an initial expected loss of 2.66%.

The notes were first marketed to investors with price guidance for a spread of between 8.25% and 9% and as we reported that price guidance was lowered and narrowed, with a range of 7.75% to 8.25% being offered to cat bond investors.

We have now learned that the Ocelot Re 2023-1 cat bond notes have been priced to pay investors a spread of 7.75%, so at the bottom of the reduced guidance and representing a roughly 10% price drop from the mid-point of initial guidance.

For Hiscox this has been a very successful venture back into the catastrophe bond market, in securing more protection than targeted at a far better priced than originally assumed possible.

It reflects the demand for index cat bonds, which has been high, while there has been excess capital in the market specifically targeting index trigger deals, meaning their execution has in some cases been particularly good and this has also provided an attractive reason for sponsors to bring industry-loss cat bonds to market at this time, we are told.

You can read all about this Ocelot Re Ltd. (Series 2023-1) catastrophe bond from Hiscox and every other cat bond issuance in our extensive Artemis Deal Directory.