Tokio Marine & Nichido Fire Insurance Co’s fifth Kizuna Re catastrophe bond will be the latest to experience a significant drop in price during its marketing to investors, with the $150 million Kizuna Re III Pte. Ltd. (Series 2021-1) transactions pricing now fixed some 16% below the initial mid-point of guidance.
So far in 2021, every 144a property catastrophe bond that has completed has seen its pricing decline to below the initial marketed mid-point of guidance.
This Kizuna Re III Pte. cat bond looks set for the same, after its pricing was fixed some 16% below the mid-point of guidance, securing the reinsurance coverage at attractive pricing for Tokio Marine.
As we explained, the target issuance size for the Kizuna Re III catastrophe bond has not changed.
Tokio Marine continues to aim to secure $150 million of reinsurance coverage against losses from Japanese earthquakes, including losses from related impacts caused by shake, tsunami, fire, flooding and sprinkler leakage, on a three-year aggregate and indemnity basis, across a five year term.
But after the price guidance range declined to below the initial one offered, it has now settled at the bottom of that reduced range.
So, Singapore based Kizuna Re III Pte. Ltd. will issue $150 million of Class A Series 2021-1 notes, that will be sold to investors and the proceeds used to collateralize underlying reinsurance agreements between the issuer and Tokio Marine & Nichido Fire Insurance.
The $150 million of Class A Series 2021-1 cat bond notes that Kizuna Re III Pte. Ltd. will issue have an initial expected loss of 1% on a three-year basis, which is 0.33% annualised.
The notes were at first offered to catastrophe bond investors with risk interest spread guidance of 2.25% to 2.5%, but that was lowered and narrowed to a revised range of 2% to 2.25%, so below the initial guidance.
Now, we understand from sources that the notes will price offering investors a 2% coupon, which is a roughly 16% decline in pricing from the initial guidance mid-point.
This is further evidence that sponsors continue to secure multi-year and fully collateralized reinsurance coverage at attractive pricing in the catastrophe bond market in 2021, which we understand is heightening interest in the marketplace among new potential sponsors as well.