Covéa finalises Hexagon IV Re cat bond at upsized €145m

French mutual insurer Covéa Group has now finalised its new Hexagon IV Re Ltd. (Series 2023-1) catastrophe bond at the upsized target for €145 million in collateralized windstorm reinsurance, while the pricing settled at the raised levels we had previously reported, we have learned.

Covéa Group had returned to the catastrophe bond market at the mid-point of October, seeking €100 million or more in fully-collateralized windstorm reinsurance protection from the capital markets with this Hexagon IV Re cat bond.

Our next update on this Hexagon IV Re cat bond deal, saw the target size rising to €145 million, while the price guidance rose on the back of investor feedback and appetite for the notes and the issuance timeline was pushed out by just over one week.

But now, Covéa Group has successfully secured the targeted larger size of protection from its new cat bond, which is its fourth catastrophe bond deal, while the pricing remained at the levels the spreads had been elevated to, our sources explained.

As a result, the Hexagon Re IV 2023-1 cat bond will now provide Covéa and its mutual insurers with €145 million in reinsurance cover against losses from windstorms affecting France, Monaco and Andorra, on an indemnity and per-occurrence basis, across four calendar years from January 1st 2024 to the end of 2027.

The Class A notes have been finalised at €125 million in size. With their initial expected loss of 4.35%, they were at first offered with price guidance for a spread of between 8% and 8.75%, but that price has now been fixed at 8.5%, so above the mid-point of initial guidance.

The Class B tranche of notes will be €25 million in size. They sit beneath the A’s, being riskier, with an initial expected loss of 8.08% and were first offered with price guidance for a spread of between 14.75% and 15.75%, but finally were priced with a much higher spread of 16.5%.

It’s good to see that Covea persisted with the issuance of both tranches of notes, despite the elevated pricing of the riskier layer.

This sends a bit of a signal for European peak peril coverage price expectations at the end of year reinsurance renewals, that prices could end up being higher than brokers and cedents anticipate.

You can read all about this new Hexagon IV Re Ltd. (Series 2023-1) catastrophe bond from Covea Group and every other cat bond transaction in our Deal Directory.