The French mutual insurer Covéa Groupe has just finalized its new Hexagon IV Re Ltd. (Series 2023-1) the catastrophe bond at the raised target of 145 million euros in guaranteed reinsurance against windstorms, while the price has stabilized at the raised levels that we had previously announced, we learned.
The Covéa group had return to the catastrophe bond market in mid-Octoberseeking €100 million or more of fully guaranteed windstorm reinsurance protection from the capital markets with this cat bond from Hexagon IV Re.
Our next update on this Hexagon IV Re catastrophe bond transaction, saw the target size rise to 145 million euroswhile price forecasts rose on investor feedback and appetite for notes and the issuance schedule was pushed back by just over a week.
But now the Covéa group has managed to obtain the largest size of protection targeted by its new cat bond, which is its fourth catastrophe bond operation, while the price has remained at the levels at which the spreads had been high, explained our sources.
Thus, the Hexagon Re IV 2023-1 cat bond will now offer Covéa and its mutual insurance companies 145 million euros of reinsurance coverage against losses linked to storms affecting France, Monaco and Andorra, as compensation and through event, over four calendar years from January 1, 2024 to the end of 2027.
Class A bonds were finalized for an amount of 125 million euros. With an initially expected loss of 4.35%, they were initially offered price guidance for a spread of between 8% and 8.75%, but this price has now been set at 8.5%. therefore above the midpoint of the initial guidance.
The tranche of class B notes will have a size of 25 million euros. They are below A’s, being riskier, with an expected initial loss of 8.08% and were first offered with price guidance for a spread between 14.75% and 15.75%, but were ultimately valued with a much higher spread of 16.5%.
It is good to see that Covea has persisted in issuing both tranches of notes, despite the high price of the riskier layer.
This sends a signal to European expectations for peak risk coverage prices at year-end reinsurance renewals that prices could end up being higher than brokers and cedants anticipate.