1 month ago
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Fidelis Insurance is back in the catastrophe bond market and seeking to sponsor what will be its sixth Herbie Re catastrophe bond, with a target to secure its largest issuance yet as the Herbie Re Ltd. (Series 2024-2) transaction targets more than $300 million in retrocessional reinsurance for the company.
This will be the the sixth Herbie Re catastrophe bond transaction to be sponsored by Fidelis Insurance, since it first entered the cat bond market back in 2020.
With a target for at least $300 million in capital markets backed, multi-peril US retrocessional reinsurance, this could also be the largest cat bond for Fidelis so far.
Using its Bermuda-based special purpose insurer Herbie Re Ltd., Fidelis is targeting to secure at least $300 million of retro protection through the issuance of three tranches of Series 2024-2 cat bond notes, we are told.
The cat bond notes will be sold to funds and investors, while the proceeds will be used to collateralize retrocessional reinsurance agreements between the SPI Herbie Re and ceding company, which is Fidelis Insurance Bermuda.
All three tranches of notes will provide Fidelis with a multi-year source of annual aggregate and territory weighted industry loss index triggered protection, we understand.
While the $300 million or more in industry-loss based risk transfer protection will be for the perils of US named storm and US earthquake risks, including DC, Puerto Rico and the US Virgin Islands, which is the same group of perils as Fidelis’ last cat bond that it sponsored in February 2024.
Two of the tranches of notes will provide Fidelis with roughly four years of coverage, running from issuance to the end of 2028, while the third tranche will cover just over two years, running to the end of 2026, sources said.
Being annual aggregate and industry loss in nature, we’re told the cat bond notes will require a franchise deductible of $20 billion per-event to be breached for a catastrophe industry loss event to qualify under the terms of the transaction.
Each of the three tranches of Series 2024-2 notes that Herbie Re Ltd. is offering will cover a different layer of risk for Fidelis and so this transcation will provide investors with a range of options, depending on their risk appetites.
A $150 million Class A tranche of notes will provide four years of protection to the end of 2028, attaching at $110 billion of aggregate industry losses and exhausting at $150 billion, giving them an initial attachment probability of 3.89%, an initial expected loss of 3.09% and initial price guidance of 7.5% to 8.25%, we understand.
An also $150 million Class B tranche of notes will also provide Fidelis with four years of protection to the end of 2028, but would attach lower down at $78 billion of aggregate industry losses and exhaust at $121 billion, giving them an initial attachment probability of 6.56%, an initial expected loss of 4.7% and initial price guidance of 11% to 12%, we are told.
The final Class C tranche of notes are as yet unsized and will provide just two years of cover to the end of 2026, with a lower still attachment point at $38 billion of aggregate industry losses and exhaustion at $78 billion, giving them an initial attachment probability of 15.21%, an initial expected loss of 10.42% and initial price guidance of 22% to 23%, so being the riskiest of the three tranches of notes on offer.
Across the three tranches there is ample room for Fidelis to opt to upsize the amount of notes issued, should pricing prove conducive.
Spread tightening has again been at its strongest for industry-loss triggered catastrophe bonds over recent weeks and with issuance conditions looking very favourable, as sponsors secure strong execution of new deals, it’s perhaps not surprising to see Fidelis looking to bring its biggest catastrophe bond to-date at this time, to capitalise on investor and fund manager appetites for new paper.
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) ·