Acorn Re parametric US quake cat bond could grow to $175m

The recently launched and still in the market Acorn Re Ltd. (Series 2023-1) parametric earthquake catastrophe bond transaction has had its target lifted to now as much as $175 million, while at the same time the pricing has been slashed.

This new Acorn Re parametric catastrophe bond was launched to cat bond investors earlier in June, with a target to secure $100 million in risk capital to back the quake insurance cover for the beneficiaries.

Each of the Acorn Re parametric cat bond deals see Hannover Re acting as the ceding reinsurance company, sitting in front of a single named ceding insurer, Oak Tree Assurance Ltd. which is a Vermont based workers compensation captive insurer that is owned by the Kaiser Permanente group of health plan companies.

So, these Acorn Re, U.S. west coast focused parametric earthquake catastrophe bonds, provide reinsurance coverage to the Kaiser Permanente workers compensation captive, covering its insured exposure to earthquake risks across that region (largely centred on California), while also providing some additional protection to other Hannover Re reinsureds that have exposure within the parametric earthquake box.

You can read about all of the Acorn Re series of parametric catastrophe bonds in our Deal Directory.

For this new issuance, Acorn Re Ltd. was seeking to issue a single Class A tranche of notes sized at $100 million, to provide per-occurrence parametric reinsurance protection against earthquakes that strike the U.S. west coast region across a term to October 2026.

We’re now told that size is likely to increase, with up to $175 million in risk transfer now sought through this parametric cat bond arrangement.

At the same time, we’re told the price guidance has been slashed for the notes.

At launch to investors, the Acorn Re 2023-1 cat bond notes, which have an annualised initial expected loss of 0.91%, were marketed with spread price guidance in a range from 4.75% to 5.5%.

We’re now told by sources that the range has been dropped, with the now larger offering of up to $175 million of notes having spread guidance in a range from 4.25% to 4.75%.

So there is every chance the Acorn Re 2023-1 parametric quake cat bond both grows in size and prices below guidance, it now appears.

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