US major insurer The Hanover Insurance coverage Group, Inc. is out out there looking for its first ever disaster bond, with a $100 million Commonwealth Re Ltd. (Collection 2022-1) deal that targets US named storm reinsurance safety for the corporate.
The Hanover Insurance coverage Group is the newest in a string of first-time cat bond sponsors in 2022, a yr that has to date seen a great deal of new market entrants, as growing numbers of re/insurers look to the capital markets for reinsurance alternate options throughout this hardening market interval.
The Hanover has registered a brand new Bermuda firm named Commonwealth Re Ltd. that’s anticipated to be licenced in time as a particular function insurer (SPI), to be used as a disaster bond issuance car.
Commonwealth Re Ltd. is aiming to problem a $100 million or larger tranche of Collection 2022-1 notes, that will likely be offered to buyers and the proceeds used to collateralize a reinsurance settlement between the car and The Hanover.
The reinsurance will shield quite a few of The Hanover Insurance coverage Group’s subsidiary insurance coverage firms towards sure losses from named storms (so tropical storms and hurricanes, in addition to associated perils) on a per-occurrence and indemnity set off foundation over a 3 yr interval.
The lined space are the US northeast states that sometimes function in a named storm cat bond centered on that a part of the nation, we perceive.
We’re informed the notes reinsurance protection would connect at $1.3 billion of losses to The Hanover and its subsidiaries, exhausting at $1.45 billion, which means this primary Commonwealth Re cat bond might upsize to as a lot as $150 million if pricing and phrases are conducive.
The $100 million of Collection 2022-1 Class A notes include an preliminary anticipated lack of 0.54% on the base case, we perceive, and are being supplied to cat bond buyers with worth steerage in a spread from 3.5% to 4%.
It’s encouraging to see one other new cat bond sponsor this yr, particularly as development underwriters like The Hanover are more likely to turn into repeat sponsors that combine cat bonds firmly inside their reinsurance towers.