Fidelis aims to further reduce Herbie Re 2024-1 cat bond pricing
Fidelis Insurance has lowered the spread guidance for its new catastrophe bond issuance for the second time, now aiming to secure the targeted $150 million of industry-loss triggered retrocession from the Herbie Re Ltd. (Series 2024-1) cat bond at a pricing level further below the initial guidance.
Fidelis has now reduced the spread guidance to such a level that if the notes now priced at their latest guidance mid-points, it could represent price drops of 22% and 16% respectively, from the mid of initial guidance.
That would be a very strong result and once again Fidelis is demonstrating its price sensitivity, with the cost of its reinsurance from the capital markets proving more important than securing additional capacity, it appears.
Fidelis came back to the catastrophe bond market at the end of January, with a $150 million target for industry-loss triggered retrocessional reinsurance with this Herbie Re 2024-1 cat bond deal.
This will be the fifth Herbie Re catastrophe bond transaction to be sponsored by Fidelis Insurance, since it first entered the cat bond market back in 2020 and as with all of its previous Herbie Re deals, this new issuance sees Fidelis looking to expand its sources of industry-loss triggered retro with the support of capital markets investors.
Herbie Re Ltd. will issue two tranches of Series 2024-1 cat bond notes, still targeting $150 million of annual aggregate and regionally weighted industry-loss based risk transfer protection, for the perils of US named storm and US earthquake risks, over an almost four year term, to the end of 2027 and the aggregate industry loss structure features a $20 million franchise deductible.
The $100 million Class A tranche of notes come with an initial expected loss of 2.92% and were first offered to cat bond investors with spread guidance in a range from 7.75% to 8.5%.
The Class A notes price guidance was then lowered to between 6.75% and 7.75%, but we’re now told this has dropped further, with the latest range being from 6% to 6.75%. From initial guidance mid-point to the mid of the latest updated guidance, this would represent a roughly 22% drop in price for these notes.
The second $50 million tranche of Class B notes are the riskier layer, with an initial expected loss of 4.51% and were first offered to cat bond investors with spread guidance in a range from 10.75% to 11.5%.
The Class B notes price guidance was then updated to between 9.75% and 10.75%, but we’re now told this has been dropped again, with an updated range of 9% to 9.75% now offered. From initial guidance mid-point to the mid of the latest updated guidance, this would represent a nearly 16% drop in price for these notes.
So, it appears that pricing within the latest update to guidance will provide another signal of the attractive price execution currently being achieved by cat bond sponsors.
Which, given this is an aggregate retro deal, provides further evidence of the way industry-loss triggered coverage has softened in price over the last few months, with appetite strong for these deals in the cat bond and ILW markets.
Read all about this Herbie Re Ltd. (Series 2024-1) catastrophe bond comes to market and you can read about this and every other cat bond deal in the Artemis Deal Directory.
