Talanx: Parametric Maschpark cat bond augments Chile quake reinsurance as exposure grows

Having recently secured its debut catastrophe bond, the $100 million Maschpark Re Ltd. (Series 2024-1) parametric earthquake issuance, German re/insurance group Talanx has said that the protection augments its need for reinsurance and to cover earthquake risks in Chile as its business grows.

As we began reporting on November 7th, Talanx AG, the German insurance and reinsurance group, entered the catastrophe bond market with its debut transaction, seeking $100 million in parametric triggered, multi-year Latin America earthquake protection.

In our second article on this cat bond, we reported that the size of the issuance was unchanged, but like many other recent catastrophe bond issues the price guidance was narrowed and lowered towards the bottom-end of the range.

Finally, we reported last week, that Talanx successfully secured the targeted $100 million of parametric earthquake reinsurance protection from its debut catastrophe bond, while the Maschpark Re 2024-1 notes were priced at the low-end of initial guidance.

Now, in announcing its first catastrophe bond to the media this morning, Talanx has explained that growth has been a key driver of its need for more reinsurance.

Talanx AG CFO Dr Jan Wicke commented, “We are a global insurance group enjoying ongoing growth and hence have an increased need for reinsurance protection. We are augmenting our protection for earthquake risks in Chile due to our strong market position there. Our cat bond transfers the risk to the capital markets, diversifying our traditional reinsurance programmes. We are delighted to be assisted in this by Hannover Re – a strong Group partner with in-depth know-how and many years’ expertise on the ILS and cat bond market.”

Talanx’s reinsurance subsidiary Hannover Re acted as a front to the capital markets for its parent group, for this Maschpark Re catastrophe bond.

“Since placing the world’s first risk securitisation 30 years ago, Hannover Re has amassed in-depth expertise in transferring insurance risk to the capital markets, and has successfully helped numerous customers from a very wide range of sectors,” explained Silke Sehm, a member of Hannover Re’s Executive Board responsible for Property & Casualty reinsurance. “We are now an ILS market leader, supporting both existing partners and new customers. We are delighted to have also provided leading-edge assistance to Talanx during its debut.”

As we have explained, the parametric cat bond will provide Talanx with parametric earthquake reinsurance across parts of South America, including Chile and areas of countries adjacent to it, but with the focus of the expected loss being on Chile and in particular the Santiago region.

The reinsurance coverage from the cat bond will run across a three-year term, from January 2025 through the end of 2027, is structured on a per-occurrence basis and utilises a parametric trigger arrangement.

Talanx successfully priced the Maschpark Re 2024-1 cat bond notes to pay investors a spread of 3.5%, which was fixed at the bottom of the initial price guidance for the deal.

As large insurance groups expand their activities around the globe, the need for catastrophe reinsurance rises and in certain regions the catastrophe bond market can either provide a differentiated capital source, or even a more efficient one.

Chile earthquake risk is becoming a peak peril for some underwriters that have a larger footprint in the country, so it stands to reason we will, over time, see more insurance-linked securities (ILS) market activity covering risks emanating from the country.

You can read all about this new Maschpark Re Ltd. (Series 2024-1) catastrophe bond and view details on almost every other cat bond ever issued in our extensive Artemis Deal Directory.