Mitsui Sumitomo lifts target for Akibare Re 2020 to $100m at higher pricing

Japanese primary insurer Mitsui Sumitomo, an MS&AD Holdings insurance company, has lifted its target for its new catastrophe bond, the Akibare Re Pte. Ltd. (Series 2020-1) Japan typhoon and flood risk transaction, with the deal now seeking up to $100 million of reinsurance coverage for the company.

Mitsui Sumitomo returned with its fifth catastrophe bond issuance to take the Akibare Re name at the beginning of March, with a deal seeking to secure a $75 million source of fully collateralised and capital markets backed reinsurance protection for the firm.

It is the first cat bond from Mitsui Sumitomo to be issued out of Singapore, as the company registered a special purpose issuer there and looks to take advantage of the ILS grant offered by the country.

Singapore domiciled vehicle Akibare Re Pte. Ltd. will issue a single tranche of Series 2020-1 Class A notes that will be sold to investors with the proceeds providing collateral to underpin a reinsurance agreement between the issuer and the sponsor Mitsui Sumitomo.

The notes issued in this Akibare Re 2020-1 deal will provide Mitsui Sumitomo with a capital market investor backed source of indemnity and per-occurrence reinsurance protection against certain losses from Japanese typhoons and Japanese flood events, across a four-year term for its fire insurance policy portfolio, which includes personal and commercial property risks.

Now, the targeted size has lifted, we’re told, with the deal now aiming for between $75 million to as much as $100 million in issuance.

The cat bond features a single Series 2020-1 Class A tranche of notes that have an initial expected loss of 0.81% and were initially marketed to investors with price guidance in a range from 2.5% to 2.75%.

We’re now told that the price guidance has lifted to the top-end of that range, with the notes offered to investors with a coupon of 2.75%.

Having claimed on one of its catastrophe bonds in the last year, after losses from typhoon Jebi ate through the reinsurance layer of coverage provided by the Akibare Re Ltd. (Series 2016-1) deal, it’s no surprise that this represents an uptick in cat bond coverage pricing for Mitsui Sumitomo.

As a comparison, the $100 million Class B tranche of notes from MS&AD’s Akibare Re Ltd. (Series 2018-1) catastrophe also covered Japan typhoon and floods and had an initial expected loss of 0.99% but saw the coupon priced much lower at 1.9%.

So with the expected loss of the Akibare Re 2020-1 Class A notes lower already at 0.81%, but the pricing some 45% higher, this transactions gives us a decent measure for where reinsurance pricing for loss affected Japanese wind risks are heading for the April renewals.

No surprise then that the uplift in pricing is close to 50%, which has been the much discussed figure in the market as we explained recently here.

We’ll update you as this new Akibare Re Pte. Ltd. (Series 2020-1) catastrophe bond comes to market and you can read about this and every other cat bond transaction in the Artemis Deal Directory.