1 week ago
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Fidelis Insurance has now secured its biggest catastrophe bond issuance, as the $375 million of Herbie Re Ltd. (Series 2024-2) notes have now been priced to provide the company multi-peril annual aggregate retrocessional reinsurance protection.
This new issuance will now become the sixth and also largest Herbie Re catastrophe bond transaction to be sponsored by Fidelis Insurance, since it first entered the cat bond market back in 2020.
When Fidelis came to market with this new Herbie Re 2024-2 cat bond in late November, the target was to secure at least $300 million of retro protection through the issuance of three tranches of Series 2024-2 cat bond notes, one of which was unsized.
Then, we reported that all three tranches of notes had their sizes assigned to them, which took the overall issuance to $375 million for Fidelis, while at the same time pricing diverged and two tranches looked set to price down, one at the top-end of its guidance.
Now, sources have told us that the Herbie Re 2024-2 catastrophe bond has been successfully priced, to secure Fidelis the targeted $375 million of aggregate retro reinsurance, while pricing remained diverged indicating investor preference and demand for returns on higher-risk layers of notes.
Across the full Herbie Re 2024-2 cat bond deal, three tranches of notes are now confirmed to provide Fidelis with a $375 million multi-year source of annual aggregate and territory weighted industry loss index triggered protection, covering losses from major events caused by the perils of US named storm and US earthquake risks, including DC, Puerto Rico and the US Virgin Islands over four years.
A $150 million Class A tranche of notes will provide Fidelis with four years of protection to the end of 2028. With an initial expected loss of 3.09%, they were first offered with price guidance of 7.5% to 8.25%, which then fell to between 7.25% and 7.5%, now having been priced at that low-end of reduced guidance to pay investors a risk interest spread of 7.25%, we are told.
A $150 million Class B tranche of notes will provide Fidelis with four years of protection to the end of 2028 as well. These have an initial expected loss of 4.7% and were offered with initial price guidance of 11% to 12%, which also then fell to a range of 10.75% to 11%, and we are now informed have also been priced at their lowest-end for a spread of 10.75% to be paid.
The final $75 million Class C tranche of notes will provide Fidelis just two years of cover to the end of 2026. These notes are riskier, having an initial expected loss of 10.42% and their initial price guidance was 22% to 23%, which has then fixed at the upper-end of 23%, and sources have now told us this is where the last tranche of notes priced, so the top-end of initial guidance.
As a result of which, Fidelis has secured its largest slice of capital markets backed collateralized retrocessional reinsurance from the catastrophe bond market yet.
While investor preferences have been on clear display, as the more remote layers priced at very attractive levels for the sponsor, while the riskier notes priced still within guidance, although at the upper-end, as investors showed they still require a certain level of return to take on this kind of lower-layer aggregate risk.
Read all about this Herbie Re Ltd. (Series 2024-2) catastrophe bond comes to market and you can read about this and every other cat bond deal in the Artemis Deal Directory.
English (US) ·