Italian primary insurance company UnipolSai Assicurazioni S.p.A. has returned to the catastrophe bond market for what will be its fourth issuance, with a €100 million Azzurro Re II DAC (Series 2022-1) issuance that seeks to extend its sources of earthquake reinsurance protection from the capital markets.
This new Azzurro Re catastrophe bond from UnipolSai is very similar to its 2020 issuance under the same special purpose vehicle, which secured the insurer a similar €100 million slice of Italy focused European earthquake reinsurance protection running to the end of 2023.
This cat bond will sit a little higher up in UnipolSai’s reinsurance tower, we understand, but otherwise is relatively similar in terms of protection offered.
Irish special purpose insurance company Azzurro Re II DAC will issue a single tranche of catastrophe bond notes that will be sold to investors and the proceeds used to collateralise an earthquake reinsurance agreement between the issuing vehicle and UnipolSai.
The target size for this Series 2022-1 issuance is €100 million, although we’re told there is room for the deal to upsize, with this Azzurro Re II 2022-1 cat bond set to span a €150 million layer of UnipolSai’s reinsurance tower.
We’re told the reinsurance protection the cat bond will provide is very similar to the 2020 issuance.
The protection will be on an indemnity trigger and per-occurrence basis, covering claims related to earthquakes impacting Italy and neighbouring countries, but with the covered subject business all being within UnipolSai’s home country of Italy.
The term of coverage will be across just more than three and a half years, to the end of 2025, we understand.
The targeted €100 million of Series 2022-1 Class A notes to be issued by Azzurro Re II DAC will cover a €150 million layer of UnipolSai’s reinsurance tower, attaching at €350 million of losses and exhausting at €500 million, we understand.
The notes will have an initial expected loss of 1.5% and are being offered to cat bond investors with coupon guidance in a range from 2.5% to 3%, sources said.
For comparison, the Azzurro Re II 2020 cat bond attached at €200 million of losses and had an expected loss of 1.84%, so was riskier, eventually pricing to provide investors a coupon of 4.5% at issuance.
So this is a slightly more risk-remote issuance from UnipolSai, compared to its still in-force 2020 cat bond.