Sompo International, the global P&C insurance and reinsurance arm of Sompo Holdings, is set to be the beneficiary of a $100 million or larger Sakura Re Ltd. (Series 2022-1) catastrophe bond that seeks US-focused natural catastrophe coverage for the company.
It will be the second Sakura Re catastrophe bond, after Sompo Japan Insurance and its affiliates were cedent to a $400 million Sakura Re Ltd. (Series 2021-1) issuance that provided that arm of the holding company with Japanese natural catastrophe reinsurance cover.
For its second issuance, we’re told that Bermuda domiciled Sakura Re Ltd. will offer a single tranche of Series 2022-1 Class A notes to cat bond investors, with $100 million or more set to be sold and the proceeds used to collateralize reinsurance agreements between the vehicle and Sompo International’s insurance and reinsurance entities.
The deal will provide Sompo International with US and Canadian specific property catastrophe reinsurance coverage, specifically against losses from named storms and earthquakes.
It’s an interesting structure though, as we understand the Sakura Re 2022-1 cat bond will feature a dual trigger, to provide Sompo International with per-occurrence retro reinsurance protection for earthquake risks and annual aggregate for named storms.
That kind of dual-trigger approach has been used by the Japanese parent before, but is a less common cat bond structure for US-focused risks.
The $100 million of Class A notes being issued will feature a PCS industry loss index trigger and the retrocessional reinsurance protection will run across a three-year term, over three annual risk periods, to almost the end of 2025.
The Class A notes can attach for an earthquake event causing an industry loss of $45bn or higher on an occurrence basis, or for a named storm events aggregating to a $140bn industry loss index level, sources said.
The notes come with an initial attachment probability of 3.73%, an initial base expected loss of 2.96% and are being offered to cat bond investors with price guidance in a range from 12.5% to 13.5%.
There is little to compare this dual-trigger cat bond against in recent history, but given the aggregate cover it will provide, it will be interesting to see where the coupon is fixed and at what multiple-at-market level.