Price guidance for Convex’s new Hypatia cat bond drops further

We understand that the pricing guidance for Convex Group’s new Hypatia Ltd. (Series 2023-1)  catastrophe bond issuance has been lowered further, as the company targets the best possible execution.

Convex sponsored its first Hypatia catastrophe bond back in 2020, when it secured $300 million of protection from the capital markets.

For 2023, Convex targets retrocessional reinsurance coverage for the same perils and in the same format as that Hypatia cat bond deal, coverage for the peak North American perils of hurricane and earthquake risks, on an annual aggregate and industry loss basis.

At launch to investors, Convex was targeting $100 million of cover from this new Hypatia Ltd. Series 2023-1 cat bond.

Then we reported that the target size had been lifted, with up to $150 million of retro reinsurance being targeted by Convex, while the pricing guidance had been reduced.

The still up to $150 million of Class A notes have an initial base expected loss of 2.52% and were first offered to investors with coupon guidance of 11.75% to 12.5%, which subsequently was reduced, to 10.5% to 11.75%, just over an 8% decline at the mid-points.

Now, we understand that the latest update on this cat bond for Convex sees the price guidance reduced, again, with a new range of 9.5% to 10.5% being offered.

Should the Hypatia 2023-1 cat bond price at the mid-point of this newly reduced spread level, it would represent a nearly 18% drop from the initial mid-point, which is a significant decline.

As we noted before though, while execution looks strong, compared to how the Hypatia 2023-1 cat bond had first been presented to investors, it will still come at elevated spread levels compared to previous issuances, reflecting the hard reinsurance market we see today.

But, the multiple-at-market has come down and continues to fall, as we’re seeing generally across new cat bond deals this month, indicating that cat bond pricing is definitely coming off its peaks as the market reacts to more investor appetite and capital availability.

You can read all about Convex’s second catastrophe bond, this Hypatia Ltd. (Series 2023-1)  transaction, and almost every other cat bond ever issued in the Artemis Deal Directory.