Pacifica’s debut Taranis Re cat bond to price up, as target lifts to €180m
In another indication of rising property catastrophe reinsurance rate expectations for European perils, the Taranis Reinsurance DAC 2023 catastrophe bond issuance for Crédit Agricole subsidiary insurer Pacifica has seen its spreads widen during marketing, but at the same time the insurer is now targeting up to €180 million of reinsurance from the deal.
It reflects rising appetites for catastrophe reinsurance cover in Europe, but also the need for higher rates from reinsurance and capital markets to assume those risks.
With Europe having faced significant storms and losses in recent years, it seems the cat bond market is pricing European cat risk higher, and we’re hearing reinsurers are likely to seek the same.
For years now, European catastrophe perils have become a dwindling feature of the cat bond market, as rates had proven insufficient for investors to assume the risk.
This Taranis Re DAC 2023 cat bond is now the third European peril focused catastrophe bond to price up in recent weeks, following after Covéa Group’s Hexagon IV Re Ltd. (Series 2023-1) and NN Group’s Orange Capital Re DAC (Series 2023-1).
With this Taranis Re DAC 2023 cat bond, Credit Agricole’s Pacifica was seeking a €150 million or greater source of reinsurance across a four year term, to protect it against losses from windstorms and hail storm events affecting France, Monaco and Andorra, to run until the end of 2027, with one tranche of notes set to provide occurrence protection and a second annual aggregate.
We’re told that Pacifica is hoping to upsize both of the tranches of notes, while the price guidance has been lifted for both as well.
The Class A tranche of Taranis Re DAC 2023 cat bond notes that will cover Pacifica against losses from windstorms and hailstorms across the covered area on a per-occurrence basis were initially €100 million in size, but we’re now told are pitched at up to €120 million.
These Class A occurrence notes have an initial expected loss of 3.53% and were first offered to cat bond investors with spread price guidance in a range from 7% to 7.5%, but we’re now told that spread guidance is elevated, at a fixed 8.25%.
The Class B tranche were set to provide €50 million of just windstorm cover, but on an annual aggregate and second event basis and we’re now told the target for the Class B tranche has also been increased to up to €60 million.
The Class B cat bond notes from Taranis Re DAC have also seen their spread raised higher, as with their initial expected loss of 1.5% they were first offered to cat bond investors with spread price guidance in a range from 5% to 5.75%, but that has now been lifted and fixed at 6%, we understand.
It’s taken a little longer than anticipated for Pacifica to get this cat bond to market, as the scheduled pricing date slipped and now we’re told the issuance will not complete until December, having originally been slated for November.
But, it’s encouraging to see Crédit Agricole’s subsidiary Pacifica persisting and looking likely to upsize its first catastrophe bond, despite higher pricing.
It shows that the reinsurance protection the cat bond market can provide for these European wind and storm related perils is deemed price appropriate still, despite rising guidance and this reflects expectations that reinsurance renewals could see firmer pricing for many European cedents this year.
View details on the new Taranis Reinsurance DAC 2023 catastrophe bond and you can read all about this and more than 950 other cat bond transactions in the Artemis Deal Directory.
