Liongate Re cat bond on-track for ~$100m Japan quake & German parametric quake limit

We understand the target remains for up to $100 million of collateralized reinsurance limit from the new Liongate Re DAC catastrophe bond that will provide Japanese mutual Zenkyoren with aggregate earthquake reinsurance, while also providing a source of German parametric quake cover for entities of the Sparkassen-Finanzgruppe.

Having initially been launched with a $100 million target in April, we understand the target for this cat bond has been updated for between that level and a slightly lower $90 million of reinsurance limit to be secured.

At the same time, we’re told that the price guidance for the Liongate Re DAC cat bond notes has risen to the upper-end of guidance.

As we reported before, the goal with this cat bond is to secure capital markets backed aggregate indemnity earthquake reinsurance for Japanese mutual Zenkyoren, while also providing a source of German parametric quake cover to protect entities of the Sparkassen-Finanzgruppe.

This dual-protection use-case of this new Liongate Re catastrophe bond issuance is innovative and shows a way to allow two sponsors to benefit, seemingly through what may be existing relationships.

Liongate Re DAC was initially aiming to issue $100 million of notes and we’re now told the target issuance size is for from $90 million up to that initial target level to be issued.

As we explained, Zenkyoren, the Japanese National Mutual Insurance Federation of Agricultural Cooperatives, is a ceding insurer to the deal, the ceding reinsurance entity is German held insurer SV Sparkassenversicherung.

German reinsurance company Deutsche Rückversicherung is acting as an intermediating reinsurance entity.

Both Deutsche Rückversicherung and SV Sparkassenversicherung are entities of the Sparkassen-Finanzgruppe.

The Japanese earthquake reinsurance protection therefore seems designed to protect Zenkyoren, while the parametric German earthquake protection is for SV Sparkassenversicherung or entities of the Sparkassen-Finanzgruppe.

The still up to $100 million of catastrophe bond notes that Liongate Re DAC will issue will provide Japanese earthquake reinsurance protection on a three-year aggregate and indemnity trigger basis for Zenkyoren, while also providing $100 million of per-occurrence parametric earthquake reinsurance covering Germany over a three year term, using a parametric box construction for the Sparkassen-Finanzgruppe entities.

The Liongate Re DAC cat bonds notes will come with an initial expected loss of 1.15% and were first offered with spread price guidance in a range from 3% to 3.5%, but we’re not told that guidance has been updated to the top-end of 3.5%.

As we said in our first article, where you can read more details on the transaction, German parametric earthquake risk is a new peril for the marketplace, as German quake risk has only been transacted in indemnity format in a cat bond before.

That, alongside the dual-protection use-case of this Liongate Re cat bond make it an innovative issuance and one that it will be encouraging to see absorbed by the investor community.

You can read all about this new Liongate Re DAC catastrophe bond and every other cat bond deal in the Artemis Deal Directory.