Achmea prices upsized €100m Windmill III Re cat bond 14% below mid-guidance

Dutch headquartered European insurance group Achmea has now secured its upsized target of €100 million of reinsurance protection from its new Windmill III Re DAC (2024-1) catastrophe bond, while the notes have now priced at roughly 14% below the mid-point of initial guidance, Artemis has learned.

It’s another signal of the suddenly strong environment for catastrophe bond issuance execution, as the market has reversed from one of spread widening and rising issuance prices, to one where deals in the market right now are generally pricing lower.

As we’ve been explaining, conditions in the cat bond market appear to have stabilised after the widening that was seen, while cash generated from recent maturities is now being leveraged to deliver better execution for cedents.

Achmea has benefited from this, but also (importantly) the fact its cat bonds offer an attractive diversification opportunity, being European peril focused.

That has all combined to enable the insurer to secure this latest capital markets backed reinsurance at very attractive terms.

Achmea returned to the cat bond market late in May, targeting €75 million or more in collateralized European windstorm reinsurance protection from this new Windmill III Re cat bond issuance.

This new Windmill III catastrophe bond will be the fourth in the Windmill series of cat bond deals for sponsor Achmea.

The new Windmill III Re DAC notes will provide Achmea with a four-year source of collateralized reinsurance protection from the capital markets to cover certain European windstorm losses on an indemnity trigger and per-occurrence basis, we are told.

At launch to investors the issuance featured only €75 million of Series 2024-1 Class A notes.

But, as we then reported in an update, the offering size grew to €100 million, which has now been successfully secured.

This new cat bond from Achmea is essentially a renewal for its soon maturing 2020 cat bond, Windmill II Re DAC (2020), that also provided Achmea €100 million of windstorm reinsurance, so this deal will now replace that fully.

The Windmill III Re Series 2024-1 Class A cat bond notes come with an initial expected loss of 2.19% and were initially offered to investors with price guidance in a range from 5.75% to 6.5%, but as we later reported that range was lowered to 5.25% to 5.75%.

Now, we’ve learned that Achmea has successfully priced the €100 million of Windmill III Re 2024-1 cat bond notes to pay investors a spread of 5.25%, so the bottom-end of the reduced guidance range.

Which represents a healthy 14% reduction in price compared to the mid-point of the initial guidance range, which is a strong result for Achmea.

As we said, this is a reflection of strong cat bond investor appetite for an opportunity that is diversifying away from US wind.

But, timing was likely also a factor, as Achmea’s latest catastrophe bond hit the market right around the time a glut of almost $2 billion in maturities came due and the market had more cash available than it saw through the previous month or two.

All of which has balanced out conditions in the catastrophe bond market, but also provided an opportunity for sponsors to benefit from stronger execution than they might have got just a few weeks earlier, with Achmea just one example of this.

You can read all about this Windmill III Re DAC (2024-1)  transaction and every catastrophe bond deal in our extensive Artemis Deal Directory.