Hong Kong headquartered global reinsurer Peak Reinsurance Company (Peak Re) has now secured $150 million of Japanese typhoon retrocession with its first ever catastrophe bond, as the Hong Kong domiciled Black Kite Re Limited (Series 2022-1) issuance priced near the top-end of raised guidance.
Peak Re entered the catastrophe bond market for the first time a fortnight ago, seeking $75 million of industry loss trigger based Japanese typhoon retrocessional reinsurance with its debut Black Kite Re cat bond deal.
It’s the first cat bond from Peak Re, it’s also only the second to be located in and issued out of Hong Kong since the special administrative region of China enacted its special purpose reinsurance vehicle and insurance-linked securities (ILS) regulations.
Peak Re’s appetite for retrocession then rose, as we were told the target size for its first Black Kite Re catastrophe bond was increased, with as much as $150 million of protection then sought by the reinsurer.
We’re now told that Peak Re has secured the upsized target, with the Black Kite Re catastrophe bond set to complete at $150 million in size.
Peak Re will benefit from a $150 million capital market backed source of collateralized Japanese typhoon retrocession cover through this cat bond, with the notes being issued by Black Kite Re Limited structured to use an industry loss trigger on a per-occurrence basis across a three-year period from June.
The attachment point for the now $150 million of Class A notes Black Kite Re will issue, equate to a $12.5 billion Japan typhoon industry loss, as reported by CRESTA, while the exhaustion point will be at $15 billion.
The now $150 million of Class A notes to be issued by Black Kite Re will have an initial base expected loss of 3.22% and were first offered to cat bond investors with price guidance in a range from 5.25% to 5.75%.
That price guidance was subsequently elevated, as we explained, with a new coupon guidance range of 6.5% to 7% offered to investors.
We can now report that the notes were priced to pay investors a coupon of 6.9%, so almost at the top-end of the raised guidance.
With this cat bond featuring a diversifying peril, in Japanese typhoon risk, coming to market at a time when most other deals are US peril focused, it really drives home cat bond investors demands for higher spreads at this time.
But it’s good to see another new sponsor, in Peak Re, successfully completing its first cat bond deal and at an upsized amount.