Japanese insurance group Mitsui Sumitomo Insurance Co. Ltd., a subsidiary of MS&AD Insurance Group Holdings, is returning to the catastrophe bond market with Akibare Re Ltd. (Series 2016-1) issuance, seeking $175m of Japan typhoon reinsurance protection.
This is the third Akibare named catastrophe bond transaction from Mitsui Sumitomo, following the Akibare Ltd. deal in 2007 and the Akibare II Ltd. in 2012, both of which were providing Japan typhoon reinsurance protection. The $130m Akibare II cat bond matures at the end of March 2016, so this new deal will replace and potentially upsize that coverage.
People familiar with the deal said that Mitsui Sumitomo is seeking a new four-year source of collateralised reinsurance protection for its Japanese typhoon exposures. Akibare Re Ltd. will issue a single Class A tranche of notes, which is said to be $175m in size.
The notes will provide Mitsui Sumitomo with annual aggregate reinsurance protection on an indemnity trigger basis for losses from Japanese typhoons impacting the country and which cause a loss above a JPY 5 billion franchise deductible across the four-year term, we understand.
The notes will attach at JPY 300 billion of losses and cover a layer up to JPY 340 billion, giving them an attachment probability of 1.36% and an expected loss of 1.19%. The notes are said to be being marketed to investors and ILS managers with price guidance of 2.5% to 3%, we’re told, giving a multiple of 2.3 times the expected loss at the mid-point of that range.
We understand that GC Securities is acting as sole structuring agent and bookrunner for this cat bond issuance, while AIR Worldwide is providing risk modelling services.
It’s encouraging to see this large Japanese insurance group return to the capital markets with a new catastrophe bond, clearly seeking to expand the ILS investor backed participation in its reinsurance program.