Zenkyoren returns with $200m Nakama Re 2023-1 quake catastrophe bond

Zenkyoren, one of the largest catastrophe reinsurance buyers in the world, has returned to the cat bond market for what will be its thirteenth issuance we have tracked, seeking $200 million or more in collateralized Japanese earthquake reinsurance through a Nakama Re Ltd. (Series 2023-1) deal.

Zenkyoren is the Japanese National Mutual Insurance Federation of Agricultural Cooperatives) and it has been utilising the insurance-linked securities (ILS) market to access catastrophe reinsurance from the capital markets since at least 2003.

This will be the thirteenth catastrophe bond directly sponsored by Zenkyoren that we have listed in our extensive Deal Directory.

Zenkyoren is using its Bermuda based special purpose insurer (SPI) Nakama Re Ltd. for its latest catastrophe bond issuance, having used a Singapore SPRV as issuer the last time it came to market.

Nakama Re Ltd. will seek to issue two tranches of notes, to raise at least $200 million in capital to collateralize reinsurance agreements between the issuer and cedent Zenkyoren, sources said.

The $200 million or more in capital will collateralize a source of Japanese earthquake reinsurance for Zenkyoren, on an indemnity trigger and annual aggregate basis, across a five-year term.

The annual aggregate nature of the protection is a departure from Zenkyoren’s last few cat bonds, as they have more typically feature a rolling three-year aggregate protection approach, over a five-year term.

The shortening of the aggregate period to annual is likely a reflection of reduced investor appetite for risk in aggregate form.

A $50 million tranche of Class A notes would attach at JPY 1.9 trillion of losses, covering a layer to JPY 2.15 trillion, giving the notes an initial attachment probability of 0.84%, expected loss of 0.79% and these are being offered with spread guidance of 2.75%.

A larger $150 million tranche of Class B notes will sit lower down, attaching at JPY 935 billion and covering losses to JPY 1.15 billion, giving the notes an initial attachment probability of 1.7%, expected loss of 1.54% and these are being offered with spread guidance in a range from 4% to 4.5%, we’re told.

The multiples-at-market indicated by the price guidance are an increase on Zenkyoren’s last Nakama cat bond from 2021, but they do not reflect as large an increase as has been seen for US catastrophe risks coming to market.

This is the first test of cat bond market appetite for a pure Japanese earthquake issuance at any scale and as a standalone peril since that last 2021 issue, so this new Nakama Re cat bond could be a good benchmark for ILS fund and investor appetite for this diversifying peril opportunity.

You can read all about this new Nakama Re Ltd. (Series 2023-1) catastrophe bond from Zenkyoren and every other cat bond transaction in the Artemis Deal Directory.