Covéa’s Hexagon III Re cat bond marked down on windstorm Ciarán exposure

As anticipated, the junior €53 million Hexagon III Re Pte. Ltd. (Series 2021-1) Class B tranche of notes from Covéa Group’s 2021 disaster bond issuance have now been marked down, because the market digests the risk posed by the insurers rising losses from November 2023’s European windstorm Ciarán.

Artemis reported last Friday that an event notice for windstorm Ciarán had been filed in relation to the Hexagon III Re Pte. catastrophe bond.

The occasion discover suggests a comparatively sturdy likelihood that traders within the notes will probably be dealing with a lack of principal.

We have been additionally informed {that a} decreased curiosity unfold was set to be paid throughout a portion of the tranche and that the potential erosion of principal to the notes might find yourself being round €11.2 million, based mostly on the information at the moment out there.

Covéa’s related final internet loss from the windstorm is claimed to be €48.7 million, so simply barely under the attachment level for the notes, however the expectation is that it will rise and development components might drive it greater nonetheless.

We stated on the time, that it might subsequently make sense to see the notes marked down round 20% or extra within the cat bond secondary market pricing sheets on Friday, which had not been issued by the point of our article.

Now, we’re informed the notes have been marked down as anticipated, with some secondary cat bond market pricing sheets having them priced for bids of between 57 and 70 cents on the greenback.

So the market has marked the Hexagon III Re Pte. Class B notes down by greater than 20%, implying a cautious strategy and that cat bond traders and fund managers are anticipating Covea’s final internet losses from windstorm Ciaran rising additional into the attachment for its disaster bond backed reinsurance protection.

Given the place the notes have been marked at for bids on the secondary cat bond pricing sheets, it appears the market is discounting them by and making ready for a lack of principal within the vary of 30% to 45%, or thereabouts, right now.

Details of catastrophe bonds facing losses, deemed at risk, or already paid out, can be found in our cat bond losses Deal Directory here.

You possibly can learn all about this Hexagon III Re Pte. Ltd. (Series 2021-1) disaster bond from Covea Group and each different cat bond transaction in our Deal Directory.