UnipolSai secures €100m Azzurro Re II 2024 cat bond at top-end pricing

Italian primary insurance company UnipolSai Assicurazioni S.p.A. has now secured its targeted €100 million in collateralized earthquake reinsurance from the Azzurro Re II DAC (Series 2024-1) catastrophe bond with pricing finalised at the top-end of initial guidance, Artemis has learned.

UnipolSai returned to the catastrophe bond market at the end of February, its first cat bond sponsorship since an attempt to secure a similar issuance in early Q2 of 2022 that failed.

Around that time, the cat bond market had experienced significant spread widening and investors became extremely selective about the cat bond deals they supported.

Which meant not every proposed new cat bond deal got away, at that time and UnipolSai’s 2022 cat bond was one of those that suffered. So the company elected to halt that issue, with a plan to return to the cat bond market once conditions had stabilised and more capacity was available.

So, UnipolSai’s return in 2024 is encouraging, showing the Italian insurer seeing the value in persisting and attempting to secure more catastrophe bond backed reinsurance.

Which we can now reveal has been successful, as we understand the insurer’s new Azzurro Re II 2024-1 catastrophe bond notes have now been priced, locking in the coverage for the company.

With pricing finalised, Irish designated activity company Azzurro Re II DAC will issue a single €100 million tranche of Series 2024-1 catastrophe bond notes to provide reinsurance coverage to UnipolSai on an indemnity trigger and per-occurrence basis, covering claims related to earthquakes impacting Italy and neighbouring countries, but with the covered subject business and so exposure base predominantly within the insurer’s home country of Italy.

The term of coverage will be across four years, with maturity slated for early April 2028 and the protection will span a €100 million layer of UnipolSai’s reinsurance tower, attaching at €250 million of losses and exhausting at €350 million.

The €100 million of Series 2024-1 Class A notes that Azzurro Re II DAC is set to issue have an initial expected loss of 2.46% and were first offered to cat bond investors with coupon guidance in a range from 5.75% to 6.5%.

As we later reported in our first update on this deal, the price guidance was raised to 6.5%, so at the top-end of the initial range of spreads that was offered.

Which is now where we’re told the notes have seen the risk spread priced, locking in the reinsurance coverage at a 2.64 multiple-at-market of the expected loss.

For comparison, UnipolSai’s Azzurro Re II 2020 cat bond had an expected loss of 2.64%, so was slightly riskier, eventually pricing to provide investors a risk interest spread of 4.5% at issuance. While, the unsuccessful 2022 issuance had an expected loss of 1.5% and was offered with price guidance of 2.5% to 3%.

As a result, it’s clear this 2024 Azzurro Re II cat bond has priced at a higher level, compared to the risk.

As we also explained in our first update on this deal, the fact the pricing rose could also be seen as a signal of a more balanced cat bond marketplace emerging, given almost every transaction had priced well down in recent weeks.

It’s good to see UnipolSai successful with its return to the catastrophe bond market and hopefully, over time, we can see this insurer layering more cat bonds across its reinsurance program to benefit from the multi-year features and efficient risk capital that sits behind them.

You can read all about this Azzurro Re II DAC (Series 2024-1) catastrophe bond from UnipolSai and every other cat bond transaction in our extensive Artemis Deal Directory.