Tokio Marine sponsoring new $100m Kizuna Re quake cat bond from Singapore

Tokio Marine & Nichido Fire Insurance Co. Ltd., the giant Japanese primary insurance group, has returned to the catastrophe bond market seeking issuance of a $100 million Kizuna Re III Pte. Ltd. (Series 2024-1) transaction, that is being issued out of Singapore to provide the company with collateralized earthquake reinsurance protection.

This is the ninth catastrophe bond we have listed in our extensive Deal Directory that will benefit part of the Tokio Marine Holdings group of companies and now the sixth in the Kizuna Re series of cat bond deals.

Tokio Marine has actually been a sponsor of catastrophe bonds since right back in 1997, when the firm brought the appropriately named Parametric Re Ltd. to market.

For its latest catastrophe bond, the Japanese insurance carrier is for the second time sponsoring a Kizuna Re catastrophe bond issuance out of Singapore, sources have told us.

As an Asian cat bond sponsor, bringing Asian risk to market, the use of the Singapore based special purpose reinsurance vehicle (SPRV) will likely bring some benefits to Tokio Marine, presumably allowing it to qualify for the Monetary Authority of Singapore’s ILS grant program offering.

Kizuna Re III Pte. Ltd. is seeking to issue a single Class A tranche of Series 2024-1 notes, that will be sold to investors and the proceeds used to collateralize underlying reinsurance agreements between the issuer and Tokio Marine & Nichido Fire Insurance.

The target size for this issuance is at least $100 million, we’re told, while the reinsurance coverage will be against losses from Japanese earthquakes, including losses from related impacts caused by shake, tsunami, fire, flooding, dam rupture and sprinkler leakage and covering such events as sea quakes and seismic volcanic disturbances or eruptions.

As with the Japanese insurers’ last catastrophe bond, this new Kizuna Re III 2024-1 cat bond will provide reinsurance coverage to a portfolio of Tokio Marine & Nichido Fire’s business, including commercial, personal and industrial property policies, personal accident, automobile losses, and certain reinsurance assumption between the cedant and group companies.

Coverage from this new cat bond will be on a three-year rolling aggregate and indemnity trigger basis, across a five year term.

This is the same as Tokio Marine’s other recent Kizuna cat bonds, where the transactions are structured with three, three-year aggregate risk periods, that overlap across the full five-year term of the reinsurance coverage. As a result, maturity for this new deal is slated for early April 2029.

We understand there is a franchise deductible per-earthquake event that qualifies under the terms of the deal of JPY 40 billion, while the attachment point for the first of the three-year risk periods is JPY 52.5bn, covering a share of losses up to JPY 232.5 billion.

It’s worth noting that the earthquake franchise deductible is higher than the JPY 25 billion from the 2021 Kizuna Re cat bonds, but the first attachment point is actually the same.

The $100 million of Series 2024-1 Class A cat bond notes that Kizuna Re III Pte. Ltd. will issue come with an initial attachment probability of 5.57% on a three-year basis (1.86% annualised) and an initial expected loss of 1.59% on a three-year basis (0.53% annualised), we understand

We’re told the $100 million of notes are being offered to catastrophe bond investors with pricing guidance of 2.75% to 3.25%.

For comparison, the 2021 Kizuna quake cat bond from Tokio Marine has an initial annualised expected loss of 0.33% and priced with a 2% spread.

It’s good to see more Japanese risk coming to market, offering a true diversification opportunity for cat bond investors and this is also the first cat bond timed for around the Japanese reinsurance renewal date of April 1st.

It’s unlikely to be for everyone, given the very low spreads on offer (as is typical with Japanese quake risk deals), but for some the chance to diversify their portfolios will be very welcome.

As a further reminder, Tokio Marine and Nichido Fire also sponsored a Japanese typhoon and flood catastrophe bond in 2021, the Umigame Re Pte. Ltd. (Series 2021-1) deal that was also issued out of Singapore.

You can read all about this new Kizuna Re III Pte. Ltd. (Series 2024-1) catastrophe bond transaction and every other Tokio Marine sponsored cat bond in our Artemis Deal Directory.