Canopius in the market for first cat bond, with $75m Finca Re

Specialty insurance and reinsurance underwriter the Canopius Group has entered the 144A catastrophe bond market for the first time, seeking $75 million or more in peak US catastrophe reinsurance protection with a debut Finca Re Ltd. (Series 2022-1) transaction.

Canopius is already active in the insurance-linked securities (ILS) marketplace, ceding risk to third-party investors via a range of ILS structures managed by its Canopius ILS division.

But this is the first full 144A catastrophe bond from the company, as it looks to cat bond investors to add to its retrocessional reinsurance protection.

Finca Re Ltd. has been established in Bermuda and is expected to be licensed as a special purpose insurer (SPI) for the issuance of series of catastrophe bond notes.

For its first issuance, Finca Re Ltd. will seek to issue a $75 million or larger tranche of Series 202-1 Class A notes, that will be sold to cat bond funds and investors, with the proceeds set to be used to collateralize a source of multi-year retro reinsurance for the company.

We’re told the Finca Re 2022-1 cat bond will ultimate protect Canopius’ underwriting entities, Canopius Re, Canopius US Insurance, Canopius Managing Agents and its Lloyd’s syndicates 4444 and 1861.

The cat bond coverage will run across a nearly three-year term for Canopius, to the end of May 2025, providing it with multi-year protection against losses from US named storms and earthquakes (including Puerto Rico and the US Virgin Islands), we understand.

The notes will provide their retro reinsurance protection on a weighted industry loss trigger basis, while the coverage will be annual aggregate in nature, sources told us, while qualifying loss events must surpass an index franchise deductible of $15 million.

We’re told the Finca Re cat bond’s expected loss implies this to be a roughly 75% named storm, 25% earthquake bond, while the US named storm protection expected loss is weighted around 50% towards Florida and Texas and the quake exposure is majority California focused.

The $75 million, or more, in Series 2022-1 Class A notes that Finca Re Ltd. will issue come with an initial attachment point of 2.47%, an initial base expected loss of 1.82% and are being offered to cat bond investors with price guidance of 7.25% to 7.75%, Artemis understands.

2022 continues to be encouraging in terms of new sponsors coming to the catastrophe bond market for their debut issues.

With Canopius a large, globally active underwriter, the firm has ample risk to cede and a successful first catastrophe bond issuance could see it embedding cat bonds within its reinsurance and retrocessional arrangements on a more significant basis going forwards.

Read all about this new Finca Re Ltd. (Series 2022-1) catastrophe bond transaction from Canopius Group and every other cat bond deal ever issued in the extensive Artemis Deal Directory.