There’s a new parametric earthquake disaster bond transaction out there, the fifth within the collection of Acorn Re offers. However for the primary time this $400 million Acorn Re Ltd. (Series 2024-1) issuance options two tranches of notes, every with a unique length of protection, Artemis has realized.
As with the earlier 4 Acorn Re parametric catastrophe bonds, this new issuance is being dropped at market by Hannover Re, appearing because the ceding reinsurance firm, sitting in entrance of and offering safety to a single named ceding insurer, Oak Tree Assurance Ltd.
Oak Tree Assurance is the Vermont-based staff compensation captive insurer that’s owned by the Kaiser Permanente group of well being plan firms.
As with the earlier offers, this Acorn Re deal is a U.S. west-coast centered parametric earthquake disaster bond, in the end offering reinsurance protection to the Kaiser Permanente staff compensation captive, protecting its insured publicity to earthquake dangers throughout that area (largely centred on California).
We assume that, just like the earlier Acorn Re’s, this newest issuance might also present some extra safety to different Hannover Re reinsureds, which have publicity inside the parametric earthquake bins as nicely ought to a serious quake occasion happen.
Acorn Re Ltd. is searching for to challenge two tranches of notes, every at the moment sized at $200 million.
A Class A tranche of notes would offer protection over a three-year time period, whereas a Class B simply over a single 12 months.
It’s attainable the technique right here is to additional stagger the protection that the Acorn Re collection of cat bonds offers. The final Acorn Re issuance, in 2023, was the primary time a brand new deal was dropped at market previous to maturity of the earlier issuance because the beneficiaries of the protection regarded to start staggering their cat bond maturities, it appeared. This can be an additional reflection of this want.
Each tranches of notes will likely be offered to cat bond traders and the proceeds used to collateralize underlying retrocessional reinsurance agreements between Acorn Re and Hannover Re. Hannover Re in flip then enters into reinsurance agreements with the Kaiser Permanente captive, Oak Tree Assurance, whereas additionally with a few of Hannover Re’s different reinsureds which have publicity within the parametric field, we perceive.
The 2 tranches of Acorn Re 2024-1 cat bond notes will present the lined events, Kaiser Permanente through the Oak Tree Assurance Ltd. staff compensation captive and the opposite reinsureds of Hannover Re, with a multi-year supply of per-occurrence parametric reinsurance safety towards earthquakes that strike the U.S. west coast area, backed by the capital markets.
As soon as once more, the vast majority of the publicity underpinning the cat bond will likely be California based mostly, whereas the lined area seems the identical west-coast US unfold, so protecting occasions that happen within the surrounding states of Oregon, Washington, Nevada, Utah, Idaho, Arizona, British Columbia in Canada, in addition to Baja California and Sonora states in Mexico and a few offshore areas of the Pacific.
As with earlier offers as nicely, a sliding scale of payouts is once more used for the parametric set off, so completely different payout percentages are attainable depending on the magnitude and placement of earthquake loss occasions, ranging from a 25% payout at the least, we’re instructed.
The $200 million Acorn Re 2024-1 Class A tranche of notes will present safety throughout a three-year time period, we perceive, whereas the $200 million Acorn Re 2024-1 Class B tranche will present protection for only a single 12 months.
Each tranches of notes function precisely the identical threat metrics and pricing, with an preliminary attachment likelihood of 1.23%, an preliminary anticipated lack of 0.88% and value steering in a spread from 3.5% to 4.1%, sources stated.
Which is tighter pricing than the 2023 Acorn Re issuance, however wider than the 2021 Acorn Re deal.
It’s good to see one other parametric US earthquake disaster bond from the Acorn Re collection coming to market. The bigger dimension and dual-tranche strategy, with completely different maturities, does appear to underscore the will to proceed making this a core protection, with longer-term advantages for the ceding entities concerned, each Hannover Re itself and the employees comp captive of Kaiser Permanente.
You learn all about this new Acorn Re Ltd. (Series 2024-1) transaction and each different disaster bond within the Artemis Deal Directory.