MS&AD hails innovative shared limit structure of new Tomoni Re catastrophe bond
Japanese insurance giant MS&AD Insurance Group Holdings has hailed the innovative structuring behind its new $200 million Tomoni Re Pte Ltd. (Series 2024-1) catastrophe bond, highlighting that it is a first in the world to have a shared limit for wind on an occurrence coverage basis and earthquake on a three-year rolling aggregate coverage basis.
As we had reported, the Japanese insurance group recently priced the Tomoni Re 2024-1 catastrophe bond to provide $200 million of collateralized reinsurance between its subsidiary insurers Mitsui Sumitomo Insurance Co. Ltd. and Aioi Nissay Dowa Insurance Co., Ltd.
The cat bond is the seventh to benefit Mitsui Sumitomo and the 3rd to benefit Aioi Nissay Dowa, the company said.
Explaining that, “Through appropriate use of reinsurance and cat bonds, the MS&AD Insurance Group Holdings will continue to strengthen risk management and improve soundness of the management, while promoting initiatives to improve the resilience of society.”
It is the second catastrophe bond from Singapore based special purpose reinsurance vehicle (SPRV) Tomoni Re Pte. Ltd. and MS&AD Holdings has taken advantage of the insurance-linked securities (ILS) grant scheme to help in subsidising the cost of cat bond issuance there.
There are two tranches of notes, one securing reinsurance protection for ceding insurer Mitsui Sumitomo Insurance Co. Ltd. and the other for Aioi Nissay Dowa Insurance Co., Ltd.
The $100 million Class A tranche of notes provide Mitsui Sumitomo Insurance Co. Ltd. with a four-year source of Japanese typhoon and Japanese flood reinsurance protection, on an indemnity and per-occurrence basis.
The second $100 million Class B tranche of notes protect insurer Aioi Nissay Dowa Insurance Co., Ltd. with a source of both per-occurrence and aggregate reinsurance coverage.
It is the Class B tranche that is seen as structurally innovative and so far unique in the catastrophe bond market.
Through a shared limit approach, the Class B notes provide Aioi Nissay Dowa Insurance with indemnity and per-occurrence reinsurance for Japanese typhoons and floods, and also rolling 3-year aggregate reinsurance for Japanese earthquake losses as well, all from the same $100 million of collateralized protection.
MS&AD said it is, “The first cat bond structure on a global basis to cover both typhoon and flood per occurrence, and earthquake on a 3-yr rolling aggregate by the same share limit.”
Aon Securities was the sole structuring agent and bookrunner for the Tomoni Re Pte. 2024-1 catastrophe bond.
The broker-dealer has a history of enabling cedents to benefit from shared limits in catastrophe bond structures, so making their access to the capital markets for reinsurance as efficient and flexible as possible.
Further commenting on its new cat bond issuance, MS&AD Insurance Group Holdings said, “Mitsui Sumitomo Insurance and Aioi Nissay Dowa Insurance diversified their capacity sources and secured long-term coverage by jointly issuing catastrophe bonds, leveraging the know-how and expertise of both companies, while continuing to enhance the group’s risk management strategies through the purchase of reinsurance.”
You can read all about this new Tomoni Re Pte Ltd. (Series 2024-1) catastrophe bond and every other cat bond transaction ever issued in the extensive Artemis Deal Directory.
