Groupama hails Quercus Re as largest aggregate Euro peril cat bond ever

Groupama said today that it is delighted with the investor support received for its new Quercus Re DAC 2024-1 catastrophe bond issuance, while it notes that the €150 million of windstorm reinsurance secured represents the largest aggregate cat bond on-record covering European perils.

We’ve looked back through our extensive catastrophe bond Deal Directory and cannot find another European peril cat bond, that we have full details for, that had been structured to provide aggregate reinsurance protection as large as the recently completed Quercus Re DAC transaction.

As we’ve been reporting, French mutual insurance and reinsurance company Groupama returned to the catastrophe bond market with an offering of Quercus Re DAC notes towards the end of June.

The insurance group was successful in securing the targeted €150 million of multi-year and fully-collateralized aggregate windstorm reinsurance protection from the Quercus Re catastrophe bond, and as we also reported the coverage was finalised at reduced pricing, as the notes priced at the lower end of initial guidance.

Announcing its new cat bond today, Groupama said that the new aggregate cat bond will protect its climatic exposures in France.

Coming into effect on July 19th and providing coverage for a three-year term, the Quercus Re cat bond offers Groupama 50% more protection than its previous cat bond that was issued in 2023, which was due to mature.

Details of every Groupama catastrophe bond can be found in our extensive Deal Directory here.

The insurer noted that, in a sign of investor interest in Groupama and its portfolio, the cat bond was placed with a “rapidly growing panel of 20 investors on behalf of funds specialising in cat bonds.”

The bond was both placed and structured by the Aon Securities team, the investment banking and insurance-linked securities arm of the insurance and reinsurance broker.

This 144A Quercus Re DAC cat bond issue was approved by the Irish regulatory authorities under the Solvency 2 regime.

The cat bond provides annual aggregate reinsurance to Groupama, structured with an indemnity trigger, and with deductibles and loss caps also in place that define the attachment and exhaustion.

Annual aggregate in nature, the cat bond coverage can be triggered if the cumulative storm claims over a year period reach 290 million euros, Groupama noted.

“This record issue in Europe in terms of amount for an Aggregate Cat bond represents effective protection for our retained climate claims. It also aims to further diversify our reinsurance capacity and demonstrates our desire to build a long-term relationship with the Insurance Linked Securities market,” explained Pierre Lacoste, Groupama’s reinsurance director.

As we had reported, the €150 million of notes Quercus Re DAC has issued have an initial attachment probability of 3.57% and an initial expected loss of 2.30%.

The notes were initially offered to cat bond investors with a spread guidance range of 8% to 8.75%, but eventually priced to pay investors an insurance risk spread of 8%, so at the bottom end of the initial guidance and indicating a multiple-at-market of 3.48 times the initial expected loss.

As we said, Groupama has finalised its latest and sixth catastrophe bond issuance with evidently strong price execution.

Being the largest aggregate cat bond covering European perils, this transaction not only shows that investor appetite remains for well-structured aggregate deals, but also that the catastrophe bond market offers an efficient and well-priced source of protection for these sometimes harder to place aggregate reinsurance covers.