Covéa Group, the French mutual insurer, has now lifted the target size for its new Hexagon IV Re Ltd. (Series 2025-1) catastrophe bond issuance to €250 million in fully-collateralized reinsurance protection, while at the same time the price guidance for each of the two tranches of notes on offer has been lowered for a second time, Artemis has learned.
Covéa is seeking to expand its capital markets backed reinsurance from the cat bond market with the inclusion of an aggregate tranche of notes with this new deal, as well as expanded protection to cover windstorm losses as in previous deals, plus cover for hail and certain other windstorm related perils.
In our first update on this cat bond’s progress to market, we reported that Covéa continued to target €200 million in fully-collateralized reinsurance, but the price guidance range for the spread for both tranches of notes had been lowered as the insurer targeted more cost-effective coverage.
Now, we’ve been told the target size has been increased for one of the tranches of notes, taking the potential issuance size to €250 million, while at the same time the price guidance has been lowered a second time for each of the tranches on offer.
Read about all of Covéa Group’s catastrophe bonds in our extensive Deal Directory.
As a result, Hexagon IV Re Ltd. is now offering two tranches of Series 2025-1 cat bond notes that will provide €250 million of reinsurance to protect Covéa and its mutual insurers with against losses from windstorms, hail and certain other perils across France, Monaco and Andorra.
The originally €150 million of Class A notes are the ones that have upsized to now provide a €200 million source of four calendar years of indemnity per-occurrence protection, while the €50 million of Class B notes have not changed in size and will provide indemnity annual aggregate protection over a two calendar year term.
The Class A per-occurrence notes that have now grown to €200 million come with an initial expected loss of 2.97%. They were initially offered to cat bond investors with price guidance for a spread of between 5.5% and 6%, which was lowered at the first update to a revised range of between 5% and 5.5%. We’re now told the latest price guidance for the Class A notes is at 5%, so the low-end of the reduced guidance range.
The Class B aggregate notes remain €50 million in size and come with an initial expected loss of 1.16%. These notes were first offered to cat bond investors with price guidance for a spread of between 6.5% and 7%, which was revised to a lower spread price range of between 6% and 6.5%. We now understand the price guidance for the Class B notes has fallen again, to between 5.75% and 6%.
As a result, it now appears that Covéa could secure a larger source of reinsurance from the capital markets and at an even more attractive price, once again reflecting the strong cat bond market conditions for sponsors at this time.
You can read all about this new Hexagon IV Re Ltd. (Series 2025-1) catastrophe bond from Covea Group and every other cat bond transaction issued in our Deal Directory.
