Zenkyoren opts for $225m Nakama Re 2023 quake cat bond at reduced pricing

Zenkyoren, the Japanese National Mutual Insurance Federation of Agricultural Cooperatives, has now secured its new Japanese earthquake catastrophe bond Nakama Re Ltd. (Series 2023-1) to provide $225 million of reinsurance protection, while pricing settled at a reduced level compared to guidance.

Zenkyoren returned to the catastrophe bond market at the start of April, seeking $200 million or more in collateralized Japanese earthquake reinsurance protection from the capital markets through this new Nakama Re 2023-1 issuance.

The two tranches of Series 2023-1 notes being issued by Nakama Re Ltd. will provide Zenkyoren with Japanese earthquake reinsurance on an indemnity trigger and annual aggregate basis, across a five-year term.

Having begun as a $200 million issuance, at one stage, Zenkyoren had lifted the target size for this catastrophe bond to as much as $275 million.

But we’re now told that the sponsor has opted to settle the deal at $225 million in size, securing the pricing it wanted, but in the end choosing not to upsize the issuance significantly it seems.

The Class A tranche of notes were originally $50 million in size, but were successfully upsized to $75 million, we’re told.

The Class A notes have an initial base expected loss of 0.79% and were first offered to cat bond investors with spread guidance of 2.75%, which was later reduced to between 2.5% to 2.75% and we’re told have now priced at the low-end of the revised guidance, for a spread of 2.5% to be paid to investors.

The Class B tranche of note, which are the riskier layer of this Nakama Re 2023-1 cat bond, were originally $150 million in size, but as we reported that was lifted with a target of up to $200 million set. In the end this tranche have been priced to offer the lower target of $150 million of notes, we’re now told.

The Class B notes have an initial base expected loss of 1.54% and were initially offered with spread guidance in a range from 4% to 4.5%, which had been fixed at and are now priced at the low-end of 4%, we understand.

For remote Japanese quake risk the multiples are still higher than previous cat bond deals seen, but it’s clear investors still value the diversification offered and so the increase in multiples and spreads is nowhere near as significant as with many US peril cat bond deals.

Now finalised, this is Zenkyoren’s thirteenth directly sponsored catastrophe bond transaction that we have listed in our extensive Deal Directory.

It’s encouraging to see the giant reinsurance buyer continuing to place cat bonds and the capital markets at the heart of its reinsurance arrangements.

You can read all about this new Nakama Re Ltd. (Series 2023-1) catastrophe bond from Zenkyoren and every other cat bond transaction in the Artemis Deal Directory.