Tokio Marine seeks $200m Umigame Re Japan typhoon & flood cat bond

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Japanese primary insurance group Tokio Marine & Nichido Fire Insurance Co. Ltd. is back in the catastrophe bond market for its first issuance to cover typhoon risks in Japan since 2011 and the company is also seeking reinsurance protection against Japanese flood losses through this new Umigame Re Pte. Ltd. (Series 2021-1) issuance as well.

tokio-marine-nichido-fire-logoDespite the company being a regular sponsor of catastrophe bonds, this is actually the first ever multi-peril cat bond deal from Tokio Marine & Nichido Fire that we have listed in our Deal Directory.

Earlier this year, Tokio Marine sponsored a $150 million Kizuna Re III Pte. Ltd. (Series 2021-1) cat bond that provides it with multi-year Japanese earthquake reinsurance protection.

Now the company has returned, with a new issuance vehicle domiciled in Singapore, Umigame Re Ptd. Ltd., looking to add a capital markets source of both typhoon and flood reinsurance from the capital markets.

Umigame Re Ptd. Ltd. will issue three tranches of notes, all of which will be sold to investors and the collateral used to support reinsurance agreements between the issuer and the sponsor Tokio Marine & Nichido Fire.

The reinsurance protection will run across four risk periods to provide almost four years of cover up to the end of March 2025, we understand.

All three tranches of notes will provide Tokio Marine with reinsurance against losses from Japanese typhoons or Japanese flood events, on an indemnity trigger and per-occurrence basis.

Because of the way the deal is structured, we understand that one tranche can provide first-event coverage to one layer of the insurers reinsurance tower, or second and subsequent event coverage to another.

Umigame Re will issue a $100 million Class A-1 tranche of notes that will provide first-event typhoon or flood protection to a higher layer of the reinsurance tower, attaching at JPY 400 billion.

This tranche of Class A-1 notes have an initial expected loss of 1.31% and are being offered to cat bond investors with price guidance in a range from 2.5% to 2.75%, we’re told.

A $50 million Class B tranche of notes will provide typhoon and flood protection across a lower layer of the reinsurance tower, attaching at JPY 220 billion.

This Class B tranche of notes will have an expected loss of 3.14% and are being offered to cat bond investors with price guidance in a range from 5% to 5.75%, we understand.

The final currently $50 million Class A-2 layer are the ones that can provide coverage to either layer of the reinsurance tower, in offering additional first-event coverage to the higher layer attaching at JPY 400 billion, or second and subsequent events affecting the lower layer at JPY 220 billion.

The Class A-2 notes have an initial expected loss of 1.32%, which brings together both the coverages this layer offers we understand, and are being offered to investors with coupon price guidance in a range from 2.75% to 3%.

It’s a clever way to structure a catastrophe bond to provide some multiple event reinsurance coverage, while also benefiting from more first-event cover to a different layer as well.

This is reminiscent of a feature of the protection in Sompo’s latest Sakura Re catastrophe bond, which had a similar feature and was also structured by Aon Securities, as this Umigame Re transaction has been.

We will keep you updated as this new Umigame Re Pte. Ltd. (Series 2021-1) catastrophe bond comes to market and you can read all about this and every other cat bond issued in our Deal Directory.

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