Another first for the catastrophe bond market in 2023, as Korean Re, the global reinsurance company headquartered in the country of its name, is set to become the beneficiary of the retrocessional coverage provided by a now-priced $75 million Solomon Re Ltd. (Series 2023-1) cat bond.
It’s the first catastrophe bond to benefit Korean Re and as the notes have priced at the bottom-end of initial spread guidance, the protection has been secured at a lower than perhaps first anticipated cost, we’re now told.
The issuance did not change in size during its offering phase, with the original $75 million of US catastrophe retro protection now secured for the beneficiary Korean Re, we understand.
Solomon Re Ltd., a Bermuda based structure, will issue a single $75 million tranche of Series 2023-1 Class A notes, with the proceeds used to collateralize a retrocession agreement between the issuer and Hannover Re, with the global reinsurer fronting the capital markets.
That protection will then be passed on to Korean Re through a reinsurance contract between Hannover Re and the ultimate beneficiary.
The notes will ultimately support the provision of $75 million of retrocessional reinsurance protection to Korean Re against certain losses from US named storms and earthquakes, over a three-year term to the end of May 2026.
Korean Re will benefit from $75 million of per-occurrence retro coverage, structured on an industry loss trigger basis, via a reinsurance agreement with Hannover Re, from this Solomon Re 2023-1 cat bond.
The coverage spans a share of layer from an attachment point of $110 million and exhausts at $285 million.
Which gives the $75 million or more in Series 2023-1 Class A notes that Solomon Re Ltd. will issue an initial attachment probability of 2.22% and an initial expected loss of 0.93%.
The $75 million in notes were first offered to cat bond investors with spread guidance priced in a range from 5.25% to 6%, but we’re now told that the spread has been finalised at 5.25%, so the bottom-end of guidance.