In what has been a bit of a rarity in the catastrophe bond market throughout recent months, the price guidance for Canadian insurer TD Insurance’s new MMIFS Re Ltd. (Series 2026-1) deal has been raised, with the insurer seeming prepared to pay a higher spread than the initial guidance had indicated.
Initially, the insurer was seeking C$125 million in aggregate reinsurance from the capital markets through an MMIFS Re cat bond deal that will cover a broader range of perils than its first transaction had.
TD Insurance had secured its debut 144A catastrophe bond a year ago, sponsoring a C$150 million MMIFS Re Ltd. (Series 2025-1) deal that provides it with per-occurrence multi-year indemnity reinsurance for losses from earthquakes and severe convective storms (SCS) in Canada.
It was the first catastrophe bond to solely cover natural catastrophe risks in Canada and from a Canadian sponsor.
For its second cat bond, TD Insurance switched the coverage being sought to annual aggregate, but also added a range of perils as well, some of which might be considered secondary in nature by certain investors.
It seems investor feedback has now resulted in the size target for this new MMIFS Re 2026-1 cat bond being adjusted to now between C$100 million and the original target for C$125 million of limit, according to sources.
While the price guidance has also been updated to a level that is above the initial guidance that the notes had been offered with.
Which appears to signal that investors were not prepared to take on this type of aggregate catastrophe risk at the initial pricing that was indicated, demonstrating discipline in the market among fund managers and investors.
So, after these updates, MMIFS Re Ltd. is offering a single tranche of between C$100 million and C$125 million Series 2026-1 Class A notes to investors, Artemis has learned.
The notes are designed to provide annual aggregate and indemnity triggered reinsurance protection for TD Insurance covering the perils of named storms, earthquakes, severe convective storms (SCS), winter storms and wildfires in Canada, over three annual risk periods, from settlement in early 2026 through to the end of 2028, so a roughly three-year term.
The now between C$100 million and C$125 million of Series 2026-1 Class A notes that MMIFS Re Ltd. is offering come with an initial expected loss of 1.96%.
At launch, the notes were being offered to cat bond investors with price guidance for an initial risk interest spread in a range from 5% to 5.5%.
We’re now told that following this update the initial risk interest spread offered is fixed at 6.75%.
That’s considerably higher than the initial guidance, in fact a nearly 29% increase from the mid-point of the first range that the notes were offered with.
So, it’s clear TD Insurance will not be able to secure the annual aggregate reinsurance it seeks from the cat bond market at or near the initial price guidance, which makes the fact the insurer is persisting with the sponsorship all the more encouraging as it shows the company has taken onboard and appreciated the investor feedback about the initial guidance that was offered and sees the aggregate cat bond coverage as sufficiently valuable to pay a higher spread for it.
You can read all about this MMIFS Re Ltd. (Series 2026-1) catastrophe bond and every other cat bond ever issued in the Artemis Deal Directory.
