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Tokio Marine targets lower pricing for $200m Umigame Re cat bond


Japanese primary insurance group Tokio Marine & Nichido Fire Insurance Co. Ltd. is on track to secure its latest catastrophe bond at reduced pricing, as the marketed spreads on the $200 million Umigame Re Pte. Ltd. (Series 2021-1) issuance have all fallen.

tokio-marine-nichido-fire-logoTokio Marine & Nichido Fire returned to the catastrophe bond market this month, with the new Umigame Re 2021-1 transaction the insurers first ever multi-peril cat bond deal fthat we have listed in our Deal Directory.

In fact, this is Tokio Marine’s first cat bond issuance to cover typhoon risks in Japan since 2011, while the insurer is also seeking reinsurance protection against Japanese flood losses through the deal.

Singapore domiciled Umigame Re Ptd. Ltd. will issue three tranches of notes, to provide reinsurance protection running across four risk periods, offering almost four years of cover up to the end of March 2025.

The reinsurance will protect the sponsor against losses from Japanese typhoons or Japanese flood events, on an indemnity trigger and per-occurrence basis, but with one tranche able to provide first-event coverage to one layer of the insurers reinsurance tower, or second and subsequent event coverage to another.

We understand that the size of the issuance has not changed, with the targeted $200 million of reinsurance still in scope from this issuance.

Umigame Re will issue a $100 million Class A-1 tranche of notes to 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 were first offered to cat bond investors with price guidance in a range from 2.5% to 2.75%. But we’re now told that this has fallen, with guidance revised to 2.25% to 2.5%.

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 were first offered to cat bond investors with price guidance in a range from 5% to 5.75%. The guidance for this tranche has also been lowered, to 4.75% to 5%, we’re told.

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 were first offered to investors with coupon price guidance in a range from 2.75% to 3%. Once again, the price guidance has been reduced and now stands at 2.5% to 2.75% for this tranche.

As a result, Tokio Marine looks set to secure its targeted $200 million of reinsurance from the capital markets with its latest catastrophe bond, but at keener pricing than initially anticipated.

You can read all about this new Umigame Re Pte. Ltd. (Series 2021-1) catastrophe bond and every other cat bond issued in our extensive Deal Directory.

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