Direct-to-consumer and fast-growing insurtech Kin Insurance has now priced its debut Hestia Re Ltd. (Series 2022-1) catastrophe bond issuance at a size of $175 million, with the coupon investors will receive finalised at the top-end of initial guidance.
Kin’s debut catastrophe bond now provides a marker for how Florida wind reinsurance rates may move at the mid-year renewals, as the first pure Florida named storm exposed issuance of 2022.
Kin entered the catastrophe bond market for the first time 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.
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, at launch of the Hestia Re Ltd. catastrophe bond.
Kins appetite for reinsurance was clearly higher than that, as the insurtech lifted its target to as much as $200 million of protection from the Hestia Re catastrophe bond.
But now, our sources tell us Kin has settled for $175 million of reinsurance from its first cat bond. Still a relatively significant amount when compared to the size of its overall reinsurance tower and importantly now locked in across multiple years.
So, now finalised, this first transaction will see Hestia Re Ltd. issue a single $175 million Class A tranche of Series 2022-1 catastrophe bond notes.
The cat bond will collateralize reinsurance agreements between Hestia Re and ceding insurer the Kin Interinsurance Network, providing it with $175 million of Florida named storm 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 now finalised at $175 million it will cover the majority of Kin’s losses in that layer of its reinsurance tower.
The $175 million of notes Hestia Re Ltd. will issue 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%.
At pricing, the coupon remained fixed at the upper-end of the initial guidance range, with a coupon of 9.5% set to be paid to cat bond investors that buy these notes.
It’s a relatively high multiple-at-market, which may provide some indications of what to expect at the reinsurance renewals come June.
It’s great to see a relatively new and high-growth insurtech like Kin demonstrating its appetite to tap into the capital markets for what represents a reasonable share of its reinsurance program.