Direct-to-consumer and fast-growing insurtech Kin Insurance is aiming to upsize its first catastrophe bond issuance, with its target for the Hestia Re Ltd. (Series 2022-1) issuance now set between $150 million and as much as $200 million of Florida hurricane reinsurance protection.
Kin entered the catastrophe bond market earlier in March 2022, with a transaction where the ultimate beneficiary of the reinsurance coverage and the ceding insurer for the Hestia Re Ltd. catastrophe bond would be its Kin Interinsurance Network, policyholder-owned reciprocal exchange.
At launch of the Hestia Re Ltd. catastrophe bond, Kin Insurance was seeking $100 million or more of reinsurance protection against losses to its personal property lines portfolio from named storms or hurricanes that impacted its key state of Florida.
Now, we’re told the appetite for reinsurance has increased, with Kin now said to be targeting up to $200 million of protection from the Hestia Re catastrophe bond.
This is despite the fact we’re told that the pricing of the notes has now been fixed at the top-end of initial guidance, the latest signal that reinsurance rates are hardening for Florida wind cover, but that the cat bond market remains an attractive alternative source of reinsurance even at higher pricing.
Hestia Re Ltd. will issue a single Class A tranche of Series 2022-1 catastrophe bond notes, now sized at between $150 million and $200 million.
The cat bond will collateralize reinsurance agreements between Hestia Re and ceding insurer the Kin Interinsurance Network, providing it with Florida wind reinsurance cover, on an indemnity trigger basis and across a three-year term.
The Hestia Re Ltd. Series 2022-1 Class A notes will cover a layer of risk attaching at $125 million of losses and exhausting at $325 million, so with the target now increased Kin could cover this entire layer of its reinsurance tower with the Hestia Re cat bond, if investor appetite allows.
The up to $200 million of notes to be issued by Hestia Re Ltd. have an initial attachment probability of 2.71% at the base case, while the initial expected loss is 1.97% and they were first offered to investors with coupon price guidance in a range from 8.75% to 9.5%.
We’re now told that the pricing has been fixed at the upper-end of that range, with a coupon of 9.5% expected, while the size of the issuance is the last factor remaining to finalise.
The coupon is a relatively high multiple of expected loss and with Kin still seeking to upsize the Hestia Re cat bond it suggests price indications in the traditional reinsurance market are high, providing yet another signal of the firming we can expect to see at the June reinsurance renewals for Florida exposure.
We’ll update you when the final size of the Hestia Re Ltd. catastrophe bond is available.
You can read all about this new Hestia Re Ltd. (Series 2022-1) catastrophe bond from Kin and every other cat bond deal issued in our extensive Artemis Deal Directory.
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