AXA XL to settle Galileo Re cat bond to provide $375m protection

AXA XL, the global specialty insurance and reinsurance unit of the AXA Group, is now on course to settle its new Galileo Re Ltd. (Series 2023-1) catastrophe bond issuance to provide the firm $375 million in catastrophe protection.

AXA XL returned to the catastrophe bond market for the first time since late 2019 last month, originally seeking $250 million or more in protection from this Galileo Re 2023-1 cat bond.

As we then reported last week, AXA XL’s target had been lifted to as much as $400 million, while at the same time the price guidance had shifted to above the mid-point of the initially marketed range.

We’re now told that the Galileo Re 2023-1 catastrophe bond has been priced and will be $375 million in size, across the two tranches of notes on offer, while pricing remained at the updated levels in the upper-halves of spread guidance.

It means that AXA XL will secure $375 million of retro reinsurance coverage for losses from U.S., DC, Puerto Rico, and Virgin Islands named storm, as well as U.S. and Canada earthquakes, all on a per-occurrence and weighted industry loss index trigger basis, with a Class A tranche of notes covering losses for four years from 2024 to the end of 2027, but a Class B tranche only covering a two year term to the end of 2025.

When it was first presented to investors, this Galileo Re 2023-1 cat bond featured Class A and Class B notes with initial expected losses of 2.1%, that were being offered with spread price guidance in a range from 6.5% to 7.25%.

The sizes were not specified at first, with the $250 million target an amount expected across the two tranches.

The target for the four year Class A tranche of notes was then set at $200 million in size, while the two year Class B tranche had targeted between $125 million and $200 million.

We’re now told that the Class A notes will secure the $200 million of four-year property catastrophe reinsurance cover for AXA XL, while the Class B notes will secure the company $175 million of two-year coverage as well.

Now priced, both tranches of Galileo Re 2023-1 cat bond notes will pay investors a 7% spread, we understand.

So, AXA XL found the catastrophe bond market’s pricing conducive to upsize its latest catastrophe bond.

However, this new issuance will not replace the maturing cover of the firm’s $475 million Galileo Re Series 2019-1 deal, that matures at the end of this year.

But then, that 2019 cat bond provided aggregate retro, where as this new 2023-1 Galileo Re cat bond provides occurrence retro reinsurance, so it is hard to compare the utility of the two within AXA XL’s overall hedging arrangements.

You can read all about AXA XL’s new Galileo Re Ltd. (Series 2023-1) transaction to our Deal Directory, where you can analyse details of almost every catastrophe bond ever issued.