The Hartford returns with $280m target for Foundation Re IV 2027-1 cat bond

The Hartford, a US primary property and casualty insurer, has returned to the catastrophe bond market with an initial target to secure $280 million or more in multi-peril collateralized catastrophe reinsurance protection from the capital markets through sponsorship of a Foundation Re IV Ltd. (Series 2027-1) cat bond issuance, Artemis has learned.

This latest catastrophe bond from The Hartford will become the eighth transaction is has sponsored since it brought to market the first in the Foundation Re cat bond series of deals back in 2004.

A year ago, The Hartford secured $270 million of multi-peril reinsurance from the capital markets through the Foundation Re IV Ltd. (Series 2026-1) catastrophe bond.

That issuance, coming within two years of the one prior, showed The Hartford looking to begin layering cat bonds within its reinsurance tower and staggering the maturities of the capital markets coverage.

Now, returning just one year later, it seems that strategy is set to continue. As we reported earlier this year, The Hartford has also been using its cat bonds to meaningfully raise the top of its occurrence catastrophe reinsurance tower.

Before turning to the new cat bond, the Hartford has $200 million of multi-peril catastrophe reinsurance from the Foundation Re IV 2023-1 issuance that matures around the end of 2026, so it’s good to see this new offering starting at a larger size.

You can read about every Foundation Re catastrophe bond from The Hartford in our extensive Deal Directory.

The Hartford is set to use Bermuda-based special purpose insurer (SPI) Foundation Re IV Ltd. for the third time as the issuing vehicle for its latest catastrophe bond.

Foundation Re IV Ltd. is offering investors a single tranche of Series 2027-1 Class A notes, with the proceeds from their sale set to be used to collateralize a reinsurance agreement between the issuer and ceding company, with the beneficiaries being Hartford Fire Insurance Co. and subsidiaries, sources explained.

The initial target is to secure at least $280 million of protection with this Series 2027-1 issuance, with the targeted reinsurance being fully-collateralized US named storm and earthquake protection, including for D.C. and Puerto Rico, across a four calendar year term running to the end of 2030.

This latest Foundation Re IV cat bond from The Hartford will feature an indemnity trigger and provide coverage on a per-occurrence basis, just like its last.

The initial attachment point for the coverage will be at $1.3 billion of losses, covering a share up to $1.7 billion, giving room for this new cat bond from the Hartford to upsize to fill this $400 million layer should the sponsor choose.

The currently $280 million of Foundation Re IV Ltd. Series 2027-1 Class A notes that are being offered will come with an initial attachment probability of 1.93%, an initial base expected loss of 1.56% and they are being offered to cat bond investors with spread price guidance in a range from 3% to 3.5%, we understand.

We can compare the risk-level and price guidance with how The Hartford’s last two cat bond settled.

The soon to mature Foundation Re IV 2023 cat bond had an initial attachment point of $1.1 billion, an expected loss was 1.36% and the notes initially paid investors a spread of 6.25%, so a significantly higher multiple-at-market than these new notes are being offered at.

Last year’s Foundation Re IV 2026-1 cat bond attached initially at $1.6 billion of losses, with an expected loss of 1.18% and priced to pay investors a spread of 3.5%, so again a higher multiple than this new 2027-1 offering.

Given the strong price execution being seen in the catastrophe bond market at this time, it will be interesting to see whether The Hartford looks to increase the size of its latest offering, given the cost-effective reinsurance cat bonds are providing to sponsors at this time.

You can read all about this new Foundation Re IV Ltd. (Series 2027-1) cat bond transaction in our Deal Directory, where you can analyse details of almost every catastrophe bond ever issued.