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An innovative new catastrophe bond has now secured its targeted $100 million of reinsurance limit, with the notes of the Liongate Re DAC cat bond now priced to provide both Japanese earthquake cover on an indemnity basis and European earthquake cover on a parametric trigger basis.
As a result this Liongate Re DAC cat bond will provide Japanese mutual Zenkyoren with aggregate earthquake reinsurance on an indemnity trigger basis, while also providing a source of German parametric triggered quake cover for entities of the Sparkassen-Finanzgruppe.
We call this new cat bond innovative for two reasons. Firstly, as we understand it is the only catastrophe bond to ever provide parametric earthquake protection covering risks in Germany and a very rare European parametric quake deal in catastrophe bond, or similar, format.
Secondly, and just as innovative, is the way it has provided a shared limit for two ceding beneficiaries, one being Japanese mutual Zenkyoren, the second being an entity of the German Sparkassen-Finanzgruppe, with that limit being shared across an indemnity aggregate cover and a parametric cover as well.
So it’s good to learn that the Liongate Re DAC catastrophe bond has now been successfully priced and so will move towards settlement and issuance in around a week’s time.
As we said before, the dual-protection and beneficiary use-case of this new Liongate Re catastrophe bond issuance is innovative and shows a way to allow two sponsors to benefit, seemingly through what may be their existing relationships.
This transaction was launched with a initial $100 million target size back in April.
As we then reported in our first update on this deal, we learned that the target had been updated for between that level and a slightly lower $90 million of reinsurance limit to be secured.
Now, we’ve been told that the initially targeted $100 million of reinsurance limit has been secured from this Liongate Re DAC issuance.
So, the first Liongate Re DAC cat bond will provide $100 million of capital markets backed limit for aggregate indemnity earthquake reinsurance for Japanese mutual Zenkyoren, while also providing German parametric quake reinsurance to protect entities of the Sparkassen-Finanzgruppe.
Recall that, Zenkyoren, the Japanese National Mutual Insurance Federation of Agricultural Cooperatives, is a ceding insurer to the deal. While German held insurer SV Sparkassenversicherung is a ceding reinsurance entity and German reinsurance company Deutsche Rückversicherung is acting as an intermediating reinsurance entity.
Both Deutsche Rückversicherung and SV Sparkassenversicherung are entities of the Sparkassen-Finanzgruppe.
This is the first time we’ve seen Deutsche Rück helping to facilitate access to the catastrophe bond market, by sitting in front of a cedant, a role we often see other global reinsurers playing in the market.
As a result, the Japanese earthquake reinsurance protection is designed to benefit Zenkyoren, while the parametric German earthquake protection is for SV Sparkassenversicherung or entities of the Sparkassen-Finanzgruppe.
The now confirmed to be $100 million of catastrophe bond notes that Liongate Re DAC will issue will provide Japanese earthquake reinsurance protection on a three-year aggregate and indemnity trigger basis for Zenkyoren, while also providing $100 million of per-occurrence parametric earthquake reinsurance covering Germany over a three year term, using a parametric box construction for the Sparkassen-Finanzgruppe entities.
The Liongate Re DAC cat bonds notes will come with an initial expected loss of 1.15% and were first offered with spread price guidance in a range from 3% to 3.5%.
We now understand that pricing was finalised at the top-end of guidance, for a risk interest spread of 3.5% to be paid to investors in the cat bond.
We are encouraged to see this innovative new catastrophe bond successfully priced and given the unique structure it could provide encouragement to others that this type of shared limit approach is viable in the cat bond market.
You can read all about this new Liongate Re DAC catastrophe bond and every other cat bond deal in the Artemis Deal Directory.
Liongate Re cat bond secures $100m Japan indemnity & German parametric quake reinsurance was published by: www.Artemis.bm
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