Netherland’s based insurer NN Group, or Nationale-Nederlanden, has now successfully secured its first slice of catastrophe bond backed reinsurance protection, as the EUR 75 million Orange Capital Re DAC (Series 2021-1) transaction has now been priced at the low-end of initial guidance.
NN Group, a life and property-casualty underwriter based in the Netherlands, entered the catastrophe bond market for the first time around a fortnight ago, with the Orange Capital Re 2021-1 issuance.
This Orange Capital Re cat bond will provide the ceding company NN Re, which is the Nationale-Nederlanden internal reinsurance vehicle, with a multi-peril tranche of catastrophe reinsurance protection sourced from capital market investors.
NN Group has turned to Ireland as the domicile for its first ever cat bond, possibly for Solvency II reasons. Orange Capital Re Designated Activity Company (DAC) was established there, to issue catastrophe bond series and notes for the benefit of the insurer.
From the start of the issuance process, Orange Capital Re (DAC) has targeted issuance of a EUR 75 million (approx. US $85m) tranche of Series 2021-1 Class A notes.
The notes will provide NN Group, via its NN Re reinsurance vehicle, with a multi-year source of collateralised reinsurance protection against losses from European windstorms and severe thunderstorms, across a covered area of the Netherlands and Belgium.
The reinsurance protection from this cat bond is structured on an indemnity trigger and per-occurrence basis, and the coverage will run across a three-year term to early January 2025.
The EUR 75 million tranche of Class A notes have an initial expected loss of 2.02% and the notes were at first offered to cat bond investors with price guidance in a range from 3.25% to 3.75%.
As we explained earlier this week, that price guidance was narrowed and fell, with the notes then offered with a 3.25% to 3.5% coupon.
At final pricing, NN Group has now secured this slice of catastrophe reinsurance protection at the low-end of guidance, with a coupon of 3.25%.
That equates to a multiple of 1.61 times the expected loss of the notes, which is relatively low, but being a European peril issuance that was always to be expected and this is actually higher than many other Europe focused cat bonds from recent years.
So, NN Group has now secured its targeted EUR 75 million of catastrophe reinsurance and with the pricing now fixed at the bottom of initial guidance, this does represent a good result for the company in a hardening reinsurance marketplace.