Fidelis could get Herbie Re cat bond recoveries for Ian & Turkey quake
The market expects specialist insurance and reinsurance company Fidelis to benefit from recoveries under two of its Herbie Re catastrophe bonds as losses from Hurricane Ian and the Tukey earthquake are expected to erode part of the principal of the two tranches of notes.
Those tickets represented a $25 million tranche, but that amount has been reduced to about $18.7 million and the remaining tickets are marked down to bids of 40 to 50 cents on the dollar.
It remains unclear whether there has already been a recovery, or a small refund and the rest of the tickets remaining in circulation and extended.
Regardless, it is clear that the catalytic bond market continues to expect a relatively small loss, while Fidelis stands to benefit from at least some level of reinsurance recovery under this tranche of notes.
We also learned that a second Herbie Re catastrophe bond is expected to see some capital loss, with Hurricane Ian being one of the affected catastrophic events, but also some expected erosion due to the Turkey earthquake.
This is the $150 million Class A notes tranche of the Herbie Re Ltd. (Series 2021-1) issuance of catalytic bonds.
As we explained previously, this tranche was already known to be exposed to Hurricane Ian, as it provides comprehensive coverage with excess deductibles and certain loss caps in place, and the contribution from Hurricane Ian had clearly provided the $35 billion per event loss cap for appointees. storm events.
This meant that further qualifying loss events, which saw industry losses exceed deductibles, could contribute to the total industry impact and progress towards joining bond retro reinsurance cover. catalytic once the global total reaches $50 billion.
The February 2023 earthquake in Turkey is one such disaster that will easily have exceeded the deductible and added about $5 billion more to the total.
While these two events alone might not meet the trigger threshold, it appears there could be other qualifying events, as this catalytic bond also covered the risks of severe thunderstorms in the United States, e.g. .
Sources tell us that the market is expecting a principle loss of 40-50% for the Herbie Re 2021-1 cat bond, which, given the $150 million size of the hedge involved, suggests that A recovery is indicated by the secondary market. to the tune of $75 million.
These two tranches of Fidelis-sponsored catastrophe bonds remain valued at levels indicative of these types of loss levels, although with continued development it could still be some time before final reinsurance recoveries are carried out and investors do not realize the loss in principle.
