Zenkyoren, the Japanese National Mutual Insurance Federation of Agricultural Cooperatives, has successfully secured $300m of earthquake reinsurance protection with the completion of its latest catastrophe bond transaction, Nakama Re Ltd. (Series 2013-1).
The Nakama Re deal doubled in size, from the $150m of notes it offered at launch, to complete at $300m as Zenkyoren confirmed its status as a repeat issuer of Japanese earthquake risk in catastrophe bond note form. Investors responded well to the Nakama Re deal, with demand helping it to upsize and pushing the eventual pricing to the mid-point of the original range.
Nakama Re is the first indemnity cat bond that Zenkyoren has issued, its previous cat bonds always being triggered based on parametric factors. This Series 2013-1 issuance secures Zenkyoren a fully-collateralized source of reinsurance protection for earthquakes across Japan and its islands including for tidal wave, fire, flood and sprinkler damage caused by earthquakes.
Yoichi Azuma, General Manager of Reinsurance Office at Zenkyoren, commented; “We are very pleased with the successful completion of the catastrophe bond issuance by Nakama Re Ltd. We would like to consider utilizing the capacity from the catastrophe bond market continuously to expand our reinsurance program in a sustainable way.”
Paul Schultz, Chief Executive Officer of Aon Benfield Securities the sole structuring agent and bookrunner on Nakama Re, added; “The offering by Nakama Re Ltd. was very well received by investors, demonstrating the importance of diversifying perils to the market, as well as the continuing development of non-U.S. indemnity structures in the catastrophe bond market.”
Nakama Re follows on from the Turkish quake Bosphorus cat bond in offering relatively remote earthquake risk, with a high attachment point, to ILS investors with a low coupon. Bosphorus priced at 2.5%, Nakama Re at 2.75%, which suggests that investors like this remote quake risk as a diversifying part of their portfolios.
With Nakama Re now completed it takes completed and settled catastrophe bond issuance for 2013 to $5.584 billion, based on our Deal Directory data. The Atlas IX Capital cat bond is due to be settled tomorrow at which point 2013 cat bond issuance will rise again to $5.765 billion, a very healthy figure for early September.
With broker-dealers at the Monte Carlo Rendezvous forecasting as many as 8 to 12 more cat bonds to launch in 2013, note launch they may not all complete in 2013, we are on track for a record year of catastrophe bond issuance.
The Nakama Re catastrophe bond program and notes have been listed on the Bermuda Stock Exchange.