Nationwide Mutual seeks $150m multi-peril Aquila Re I catastrophe bond

U.S. primary insurer Nationwide Mutual Insurance Company is targeting at least $150 million in multi-peril reinsurance protection from the catastrophe bond market with a new Aquila Re I Ltd. (Series 2024-1)  transaction, its second to use this special purpose insurer, Artemis has learned.

Nationwide Mutual Insurance Company is a long-standing sponsor of catastrophe bonds, having first secured property catastrophe reinsurance from the capital markets through 144A cat bond back in 2008.

In fact, this new Aquila Re I deal will be the tenth Nationwide sponsored catastrophe bond issuance that we have listed in our extensive Deal Directory.

It’s the second from Bermuda-based Aquila Re I Ltd., after Nationwide secured $300 million of multi-peril reinsurance through the structure a year ago, with the Aquila Re I Ltd. (Series 2023-1) deal.

For a 2024 issuance, Nationwide Mutual is seeking similar coverage to a year ago, we understand, targeting multi-peril and multi-year indemnity triggered and per-occurrence based reinsurance protection.

Aquila Re I Ltd. will issue two tranches of Series 2024-1 notes, that will be sold to investors and the proceeds used to collateralize reinsurance agreements with Nationwide.

The reinsurance from this new cat bond will protect Nationwide Mutual against losses from the perils of US named storm, earthquake, severe thunderstorm, winter storm, wildfire, meteorite impact, volcanic eruption, the same range of perils as last year’s cat bond.

The protection will run across a three-year term, from June 2024 to the end of May 2027, we understand.

The first Class A-1 tranche of notes is preliminarily sized at $100 million and the coverage from these notes would attach at $1.95 billion of losses, exhausting at $2.35 billion, giving them an initial attachment probability of 1.21%.

The $100 million of Class A-1 notes come with an initial base expected loss of 1.01% and are being offered to cat bond investors with price guidance in a range from 6% to 6.75%, sources said.

The second Class B-1 tranche of notes is preliminarily sized at $50 million and their coverage attaches at $1.2 billion of losses, exhausting at $1.55 billion, so these are riskier, giving them an initial attachment probability of 3.09%.

The $50 million of Class B-1 notes come with an initial base expected loss of 2.44% and are being offered to cat bond investors with price guidance in a range from 9.25% to 10%, we are told.

This new cat bond from Nationwide Mutual does provide a reasonable chance to look at pricing in the cat bond market year-on-year, as the Class B notes from the 2023-1 issuance had an expected loss of 1.03%, so were close to the Class A-1 notes from this issuance.

Those 2023-1 Class B cat bond notes eventually priced to pay investors a spread of 7.5% so a multiple-at-market of 7.28 times the EL, so already the initial price guidance of this new deal appears quite a bit lower as the A-1 notes imply a multiple of 6.32 times EL at the guidance mid-point.

Which implies around 13% softer pricing year-on-year, based on the multiples at issuance. But, given how the market has developed in recent weeks, it would not surprise us to see this deal pricing lower than the mid-point as well, extending the decline in pricing over Nationwide’s cat bond from a year ago.

You can read all about this new Aquila Re I Ltd. (Series 2024-1) catastrophe bond transaction and every other cat bond ever issued in our Artemis Deal Directory.