Japanese insurance group MS&AD Insurance Group Holdings looks set to secure a new $320 million source of capital markets backed reinsurance protection at efficient pricing, as its latest catastrophe bond, the Akibare Re Ltd. (Series 2018-1) deal, secures the maximum targeted size at the lowest targeted pricing level.
The Akibare Re 2018-1, which launched to ILS market investots at the beginning of March, sees Mitsui Sumitomo Insurance Co. Ltd. and fellow MS&AD stable insurer Aioi Nissay Dowa Insurance Co., Ltd. seeking a capital markets backed source of fully collateralized multi-peril reinsurance protection.
At launch the transaction was sized at just $225 million, but the target was lifted to between $300 million and $320 million of coverage for the insurers thanks to demand from investors and now we understand from sources that the upper end of that range was secured, at $320 million.
So this Akibare Re 2018-1 cat bond will provide the two MS&AD insurers with $320 million of per-occurrence reinsurance protection on an indemnity trigger basis across a four-year term.
The transaction now consists of a $220 million Series 2018-1 Class A tranche of notes that will benefit only Mitsui Sumitomo Insurance Co. Ltd. with reinsurance protection against losses from typhoons, floods and earthquake related fire events across Japan, and a $100 million Class B layer, designed to benefit only Aioi Nissay Dowa Insurance Co., Ltd. with reinsurance protection against losses from just typhoons and floods in Japan.
Both of these tranches upsized during the marketing process as the insurers capitalised on the evident investors demand, to secure more reinsurance from the capital markets.
The $220 million Class A tranche of notes, which have an expected loss of 0.73%, launched with initial price guidance of 2% to 2.5%, which was subsequently slashed to 1.9% to 2% and has now been fixed at the lowest end of the reduced guidance at 1.9%, we understand.
The $100 million Class B tranche, which has an expected loss of 0.99%, had initial price guidance of 2% to 2.5%, which was slashed down to 1.9% to 2% and has now been fixed at the bottom end of the range at 1.9%, we’re told.
This issuance demonstrates that the appetite persists among catastrophe bond investors to take on these remote risk Japanese issuances, even with very low coupons, which bodes well for any other potential sponsors seeking to issue similar deals.
This Akibare Re 2018 cat bond will be complete before the end of the month, so falling into first-quarter 2018 cat bond issuance which already stands at $2.92 billion, according to Artemis data.