Direct-to-consumer and fast-growing insurtech company Kin Insurance has returned to the catastrophe bond market to sponsor its second issuance, seeking $100 million or more in Florida named storm protection from a Hestia Re Ltd. (Series 2023-1) transaction.
This is the second catastrophe bond issuance from Kin Insurance’s Bermuda special purpose vehicle Hestia Re Ltd.
Kin had secured its debut $175 million Hestia Re Ltd. (Series 2022-1) catastrophe bond cover back in April 2022.
That deal is still not completely out of the woods, in regards to potential exposure to hurricane Ian, as we reported last week, although the pricing on the Hestia 2022-1 cat bond notes in the secondary market had been recovering somewhat. It still remains to be seen whether the Hestia Re 2022-1 cat bond could face any loss, should Kin’s ultimate losses from the storm increase.
But that hasn’t deterred Kin Insurance from returning to the catastrophe bond market and unsurprisingly the new Hestia Re 2023-1 cat bond comes offering a much higher multiple-at-market.
It’s notable that the 2022 deal had paid investors in the cat bond a 4.8 multiple of expected loss, the new 2023-1 cat bond could pay a 10.5 times EL multiple at the mid-point of price guidance.
For its second cat bond, we’re told that Kin’s Bermuda-based special purpose insurer, Hestia Re Ltd., will seek to issue a single Class tranche of Series 2023-1 notes, preliminarily targeting $100 million in size, with these notes set to be sold to investors and the proceeds used to collateralize a reinsurance agreement between the SPI and ceding company.
The cedent is initially the Kin Interinsurance Network, but we’re told that Kin could add additional covered cedents should it launch further underwriting entities during the term of the cat bond.
The notes will provide Kin with a three-year source of fully-collateralized Florida named storm reinsurance, on a indemnity trigger and per-occurrence basis, we understand.
The currently $100 million of Hestia Re Series 2023-1 Class A notes would attach at $110 million of losses and exhaust at $310 million, although potentially inure to other layers in Kin’s reinsurance tower (such as the FHCF coverage), we imagine (as its previous cat bond had).
That gives the Hestia Re 2023-1 Class A notes an initial attachment probability of 1.36% and an initial base expected loss of 1.04%, while they are being offered to cat bond investors with price guidance in a range from 10.5% to 11.5%, sources said.
Giving the new cat bond notes the potential to have a multiple-at-market roughly double that of Kin’s first Hestia Re cat bond deal.
For Kin Insurance, getting out early to secure Florida named storm reinsurance protection could be a very shrewd move in 2023, as renewal conditions at June 1st are expected to be very challenging.
A new cat bond could secure Kin an important layer of protection, giving it greater certainty as it approaches the rest of its reinsurance renewals for 2023, while also sitting alongside the first Hestia Re cat bond and so replacing any principal that might get lost if Kin’s hurricane Ian losses crept higher and attached that deal.
You can read all about the Hestia Re Ltd. (Series 2023-1) catastrophe bond from Kin and every other cat bond deal issued in our extensive Artemis Deal Directory.
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