AXA seeks €125m European windstorm cover with new Eiffel Re cat bond

Global insurance and reinsurance group AXA has returned to the catastrophe bond market in 2023 for its first transaction since 2019, seeking €125 million or more of European windstorm reinsurance protection through an Eiffel Re Ltd. (Series 2023-1) cat bond issuance.

AXA entities in Bermuda, under AXA XL, had previously sponsored a number of catastrophe bonds both as XL Catlin and then after AXA acquired them as AXA XL, using special purpose insurers named Galileo Re and Galilei Re.

We understand that this new Eiffel Re Ltd. Bermuda SPI is actually the same Galilei Re Ltd. SPI after it has been renamed, saving AXA the task of establishing a new issuance vehicle for catastrophe bonds, while the new name speaks for itself.

The last use of the Galilei Re SPI was back in 2017.

Eiffel Re Ltd. will look to issue a single tranche of Series 2023-1 catastrophe bond notes, that will be sold to investors and the proceeds collateralize a reinsurance agreement between the issuer and AXA SA, we understand.

While AXA SA is the sponsor, this first Eiffel Re cat bond will cover any affiliates of the insurance group as well, so presumably the AXA XL book is included in that and as a result this cat bond will provide both reinsurance and retrocessional protection for European windstorm losses group-wide.

We’re told that the coverage area includes the majority of the typical European windstorm exposed countries, also including the United Kingdom.

The notes feature an industry-loss trigger and will provide per-occurrence reinsurance and retro cover, we understand, while the industry-loss index reporting agent will be Cresta, the PERILS operated organisation.

The coverage will run from issuance at the end of June through to maturity on January 19th 2027, we understand, so providing AXA and its affiliates with European windstorm reinsurance across a roughly three and a half year term.

The currently €125 million in Series 2023-1 Class A notes that Eiffel Re Ltd. will issue come with an initial attachment probability of 0.58%, an initial expected loss of 0.45% and are being offered to investors with spread price guidance in a range from 3.25% to 3.75%, we’re told.

This new Eiffel Re catastrophe bond is encouraging to see for two key reasons.

First, the return of AXA, a major global re/insurance group, to the catastrophe bond market after a roughly four year period without sponsoring any deals.

But second and perhaps even more notable, is the fact this is a relatively remote risk European windstorm cat bond, something we don’t see very often at all these days as traditional reinsurance sources have been so competitive for that peril and spreads had dropped so low that ILS fund managers were less interested.

While this is still a very thin spread, understandable given the risk, the multiple is now far more appealing than previous windstorm cat bonds focused on Europe had offered before the period of price hardening we’ve seen.

It’s possible the cat bond market now looks a more competitive and complementary source of alternative reinsurance for European catastrophe perils, now the traditional market is so much firmer. That could be positive for more European peril cat bonds to come to market, which would be welcomed for the diversification away from the US that they offer.