German insurer Versicherungskammer Bayern Versicherungsanstalt des oeffentlichen Rechts’ (VKB) has now successfully priced its debut King Max Re DAC 2023 catastrophe bond issuance to provide it with an upsized €175 million of multi-peril catastrophe reinsurance protection.
VKB, one of the ten largest domestic market insurance groups in Germany, entered the catastrophe bond market for the first time last month, with its VKB Re reinsurance entity acting as cedent for an issuance that looked to secure €150 million in fully-collateralized multi-peril reinsurance for the company.
We then learned that VKB’s target for its first cat bond had lifted slightly, with an upsized €175 million of reinsurance sought from this King Max Re 2023-1 deal.
That upsized target has now been achieved, we’re told, as the notes were priced late Friday to secure the higher target for reinsurance for VKB.
As a result, the King Max Re DAC cat bond is now confirmed to provide the VKB insurance group with a €175 million source of indemnity and per-occurrence reinsurance protection from the capital markets.
The catastrophe reinsurance from its debut cat bond will protect VKB group against losses from earthquakes, hailstorms, floods and windstorms in Germany, over a three year term beginning January 1st 2024.
The successful upsizing of the deal to €175 million means that VKB has more coverage across the layer of its reinsurance tower that this cat bond features in, attaching at €900 million of losses and exhausting at €1.1 billion.
The now confirmed at €175 million tranche of Series 2023-1 Class A cat bond notes that King Max Re DAC will issue have an initial expected loss of 0.81% and were first offering investors a spread of 4.25% to 5%.
Eventually, the pricing of the notes on Friday was at the top-end of guidance, to pay investors 5% above the risk-free rate, we’re now told.
It’s encouraging to see a first-time European sponsor of catastrophe bonds finding the pricing conducive enough to upsize the deal, even at the upper-end of price guidance.
You can read all about this King Max Re DAC 2023 catastrophe bond transaction to our Deal Directory, where you can analyse details of almost every cat bond ever issued.
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