Allianz returns to cat bond market for €250m European storm protection

Global insurance giant Allianz is back in the catastrophe bond market seeking a €250 million or larger group-wide source of European windstorm reinsurance protection with a Blue Sky Re DAC (2023-1) issuance.

Allianz features numerous times in our extensive catastrophe bond Deal Directory, but in recent years these have all been for its Allianz Risk Transfer division to provide retrocession for some of the risk it fronted for ILS funds.

Prior to that, the last time we saw Allianz group in the cat bond market was back in 2013.

So, it’s encouraging to see Allianz back looking for reinsurance to cover its group-wide European exposures and this is another signal on European reinsurance renewals, showing that this kind of protection is deemed as likely to be secured in the cat bond market, as from traditional reinsurance and retrocession sources, which is positive for the cat bond market to expand its footprint back into European perils, we believe.

Allianz has set up an Irish special purpose company to issue this catastrophe bond, Blue Sky Re DAC.

Blue Sky Re DAC will issue a single tranche of notes that will be sold to investors and the proceeds used to collateralize a reinsurance agreement between it and Allianz.

Currently the offering is for €250 million of notes, with the aim to source capital markets backed reinsurance to cover the Allianz group companies against European windstorm losses, in all the main exposed countries, on a weighted industry loss trigger and per-occurrence basis, we understand.

The largest contributors to the windstorm expected loss of this new Allianz cat bond are said to be the countries of Germany, the UK and France.

We’re told the coverage for Allianz from this cat bond would run for three calendar years from January 1st 2024, to the end of 2026.

The €250 million of notes to be issued by Blue Sky Re DAC will come with an initial attachment probability of 3.03%, an initial expected loss of 2.14% and are being offered to cat bond investors with price guidance for a spread of between 5% to 5.75%, sources said.

It’s encouraging to see an insurer of the scale of Allianz back in the catastrophe bond market this year and the fact it is looking for European peak peril coverage does suggest that conditions for reinsurance renewals in that continent could become more appealing for the insurance-linked securities (ILS) market in general, which is a positive signal.

The multiple on offer with these notes is relatively low however, so it will be interesting to see how the cat bond market responds and how strong investor appetite for it turns out to be.

You can read all about this new Blue Sky Re DAC (2023-1)  catastrophe bond from Allianz in the Artemis Deal Directory.