UnipolSai tries again with €100m Azzurro Re II 2024 earthquake cat bond

Italian primary insurance company UnipolSai Assicurazioni S.p.A. is back in the catastrophe bond market and seeking €100 million in earthquake reinsurance protection through an Azzurro Re II DAC (Series 2024-1) cat bond issuance, Artemis has learned.

This new cat bond will be the fifth listed in our extensive Deal Directory to be sponsored by UnipolSai.

The last time UnipolSai was in the catastrophe bond market was back in 2022, when the company attempted to secure a similar €100 million slice of collateralized reinsurance through the Azzurro Re II 2022-1 earthquake cat bond.

However, having been in the market with that deal for some weeks through April and into May of 2022, it eventually became clear that its issuance had been cancelled, due to conditions in the ILS market and broader capital markets, as well as the effect those had on investor appetite.

Around that time, the cat bond market had experienced significant spread widening and investors became extremely selective about the cat bond deals they supported.

Not every proposed new cat bond deal got away at that time and UnipolSai’s 2022 cat bond was one of those that suffered and so the company elected to halt that issue, with a plan to return to the cat bond market once conditions had stabilised and more capacity was available.

Now, with catastrophe bond and broader capital market conditions far more conducive to strong execution, UnipolSai is back for an only slightly changed Azzurro Re II 2024-1 issuance, we understand.

Irish designated activity company Azzurro Re II DAC will issue a single tranche of catastrophe bond notes that will be offered for sale to investors and the proceeds from that sale used to collateralize an earthquake reinsurance agreement between the issuing vehicle and UnipolSai.

The target size for this Series 2024-1 issuance is €100 million and we understand is not deemed likely to upsize from that, as this Azzurro Re II 2024-1 cat bond coverage will span a €100 million layer of UnipolSai’s reinsurance tower.

The earthquake reinsurance protection this new cat bond will provide is very similar to the previously successful 2020 issuance and the structure of the halted 2022 deal.

The reinsurance coverage will be on an indemnity trigger and per-occurrence basis, covering claims related to earthquakes impacting Italy and neighbouring countries, but with the covered subject business and so exposure base predominantly within UnipolSai’s home country of Italy.

The term of coverage will be across four years, we are told, with maturity slated for early April 2028.

The targeted issuance of €100 million of Series 2024-1 Class A notes by Azzurro Re II DAC will cover a €100 million layer of UnipolSai’s reinsurance tower, attaching at €250 million of losses and exhausting at €350 million, we understand.

The 2024-1 notes will have an initial attachment probability of 3.02%, an initial expected loss of 2.46% and are being offered to cat bond investors with coupon guidance in a range from 5.75% to 6.5%, sources have told us.

For comparison, the Azzurro Re II 2020 cat bond had an expected loss of 1.84%, so was slightly riskier, eventually pricing to provide investors a coupon of 4.5% at issuance, while the unsuccessful 2022 issuance had an expected loss of 1.5% and was offered with price guidance of 2.5% to 3%.

On a multiple-at-market basis, the pricing of this 2024 cat bond looks close to the 2020 deal, but higher than the multiple offered in 2022.

It’s good to see UnipolSai returning to the catastrophe bond market, showing that the insurer still sees the capital markets as a core source of diversifying peak peril catastrophe reinsurance protection for its business.

You can read all about this Azzurro Re II DAC (Series 2024-1) catastrophe bond from UnipolSai and every other cat bond transaction in our extensive Artemis Deal Directory.