Mitsui Sumitomo secures 33% upsize to $100m for Akibare 2020 cat bond

Japanese primary insurer Mitsui Sumitomo, an MS&AD Holdings insurance company, has successfully secured its targeted upsize for its new catastrophe bond, the Akibare Re Pte. Ltd. (Series 2020-1) Japan typhoon and flood risk transaction, with the deal set to provide the firm $100 million of reinsurance.

Mitsui Sumitomo came back to the catastrophe bond market with its fifth issuance using the Akibare Re name at the beginning of March, in a transactions seeking to secure at least a $75 million source of fully collateralised and capital markets backed reinsurance protection for the firm.

Now, we understand that the transaction has successfully been upsized by 33% to price offering Mitsui Sumitomo a $100 million source of collateralised catastrophe reinsurance protection.

This is the first cat bond from Mitsui Sumitomo to be issued out of Singapore, with the insurer having registered a special purpose issuer in that domicile as it looks to take advantage of the ILS grant offered by the country.

So this will be the first catastrophe bond issued on behalf of an Asian sponsor to come out of the Singapore ILS market, an important step forwards for its ILS ambitions.

Singapore domiciled special purpose reinsurance vehicle Akibare Re Pte. Ltd. is set to issue a single $100 million 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 $100 million capital market investor backed source of indemnity and per-occurrence reinsurance protection, covering 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.

At the same time as increasing in size, we’re told that the pricing has now been finalised at the upper-end of guidance, reflecting a significant price increase over prior year cat bond deals sponsored by Mitsui Sumitomo.

This cat bonds single $100 million Series 2020-1 Class A tranche of notes 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%.

Pricing was eventually finalised with the cat bond set to pay investors 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 unsurprising that this represents an increase in cat bond backed reinsurance pricing for Mitsui Sumitomo.

For 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% (so higher) but saw the coupon priced much lower at 1.9%.

The pricing of this new cat bond is some 45% higher, perhaps closer to 50% on a risk adjusted basis, and now provides us with a reasonable measure for where reinsurance pricing of loss affected Japanese wind layers are heading at the April 1st renewals.

50% has been a much discussed figure in the market, in terms of expected price increases for the April renewals, as we explained recently here.

You can read all about this new $100 million Akibare Re Pte. Ltd. (Series 2020-1) catastrophe bond and every other cat bond transaction in the Artemis Deal Directory.