Zenkyoren secures its largest cat bond ever, with $775m Nakama Re 2021-1


Zenkyoren, the Japanese National Mutual Insurance Federation of Agricultural Cooperatives and one of the world’s largest buyers of catastrophe reinsurance protection, has now successfully secured its largest slice of catastrophe bond protection ever, as its new  Nakama Re Pte. Ltd. (Series 2021-1) issuance achieved the top-end target of $775 million, we’re told.

zenkyoren-logoThis is notable as Zenkyoren buys a significant catastrophe reinsurance program, in which catastrophe bonds have played a part since at least 2003, but this is the biggest issuance yet to benefit the Japanese mutual sponsor, which shows the insurer increasing the capital market participation in its treaty.

Zenkyoren returned to the catastrophe bond market just over a fortnight ago with a new Nakama Re cat bond that had a target of securing at least $500 million of Japanese earthquake reinsurance protection for the sponsor.

The latest Nakama Re cat bond is the first to be sponsored by Zenkyoren using Singapore is its domicile of issuance, so the giant Japanese mutual insurer stands to benefit from the ILS grant scheme offer that is available there.

This is the twelfth and now officially the largest catastrophe bond directly sponsored by Zenkyoren that we have listed in our extensive Deal Directory.

The previous largest cat bonds sponsored by Zenkyoren that we have details on in the Directory were two $700 million issues in 2016 and 2018.

It’s also notable that the $700 million Nakama Re Ltd. (Series 2016-1) cat bond is scheduled for maturity in October, meaning Zenkyoren now stands to more than replace that expiring capital market backed reinsurance protection.

So, with this new catastrophe bond, Zenkyoren has secured $775 million of reinsurance protection on a three-year aggregate, indemnity triggered basis, to cover it against Japanese earthquake risks.

The coverage will run across almost five years to October 2026, with three annual aggregate risk periods, each three-years in length, that overlap across the term.

When it first emerged, this deal targeted an issuance of at least $400 million of Series 2021-1 Class 1 notes, with a three-year expected loss of 2.2%, or 0.73% annualised, and these were offered to cat bond investors with price guidance in a range from 1.75% to 2.2%.

The Class 1 tranche target lifted to between $500 million and $550 million, in terms of issuance size and the pricing was fixed at 2.05%.

This Class 1 tranche of notes has now been priced at the same 2.05% coupon at the top-end target of $550 million, sources told Artemis today.

Meanwhile, the Class 2 tranche of Series 2021-1 notes launched as just a $100 million riskier layer, with a three-year expected loss of 3.77%, or 1.26% annualised, and price guidance of 2.5% to 3%

The Class 2 notes then also saw their targeted size lift to between $175 million to $225 million, while the pricing was fixed with a coupon of 2.75%.

The Class 2 notes priced at that 2.75% coupon, but also achieved the top-end target in terms of size, at $225 million.

It’s another successful visit to the catastrophe bond market for the biggest purveyor of Japanese earthquake risk, bringing more valuable diversification to ILS investors, while securing very competitively priced reinsurance for Zenkyoren.

You can read all about this Nakama Re Pte. Ltd. (Series 2021-1) catastrophe bond and every other cat bond transaction in the Artemis Deal Directory.

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