Nationwide aims to double Aquila Re I cat bond to $300m

U.S. primary insurer Nationwide Mutual Insurance Company is seeking to double the size of its new catastrophe bond, with its target for the deal now lifted to $300 million of multi-peril US catastrophe reinsurance, from this Aquila Re I Ltd. (Series 2023-1) transaction.

Nationwide Mutual Insurance Company has been sponsoring catastrophe bonds since as far back as 2008.

We now have nine Nationwide sponsored catastrophe bond issues, all under a range of Caelus Re names, listed in our extensive Deal Directory.

The insurer returned to the cat bond market around the middle of April, seeking $150 million in multi-peril US catastrophe reinsurance coverage through this Aquila Re I Ltd. Series 2023-1 deal.

We’re now told that the target size has been increased significantly, with a doubling in size possible to provide Nationwide with $300 million of collateralized reinsurance from this new catastrophe bond.

The Aquila Re I 2023-1 catastrophe bond will provide Nationwide Mutual and subsidiaries, including auto insurer Titan Insurance Company, with reinsurance against losses from multiple U.S. perils, including U.S. named storm, earthquake, severe thunderstorm, winter storm, wildfire, meteorite impact, and volcanic eruption.

The reinsurance will run across three layers of notes issued, with each structured on an indemnity trigger and per-occurrence basis, to provide Nationwide reinsurance across a three-year term to the end of May 2026.

At launch, each tranche of notes were preliminarily sized at $50 million, but we’re now told two of those are likely to more than double in size.

At the same time, we’re told Nationwide is targeting below-guidance pricing for all three tranches of notes.

The Class A tranche of notes are still targeted at $50 million in size, the only layer not to have grown. The Class A notes have an initial base expected loss of 0.37% and were first offered with price guidance of between 5.75% and 6.5%, but we’re now told that spread guidance has been lowered to 5.25% to 5.75%.

The Class B tranche of notes are now targeted at $125 million in size. These notes have an initial base expected loss of 1.03% and were offered with price guidance of 8% to 8.75%, but that has also been reduced to 7.5% to 8%, we’re told.

Finally, the riskiest Class C tranche of notes have also grown to $125 million in size. These notes have an initial base expected loss of 1.57% and were offered with initial price guidance of 9.75% to 10.5%, which has also been lowered to 9.25% to 9.75%, we understand.

Given the trend for cat bond investors to aim higher up reinsurance towers this year, it’s perhaps surprising the lowest risk tranche hasn’t grown, but it’s possible Nationwide can place that higher layer more efficiently using a mix of reinsurance capital sources.

It’s encouraging to see Nationwide looking to double the size of its new catastrophe bond, showing the company still has a strong appetite to bring the capital markets into its reinsurance arrangements.

You can read all about this new Aquila Re I Ltd. (Series 2023-1) catastrophe bond transaction and every other cat bond ever issued in our Artemis Deal Directory.