Aspen returns for $150m Kendall Re catastrophe bond renewal

Aspen Insurance Holdings Limited is back in the catastrophe bond market for a second renewal of its international multi-peril catastrophe bond coverage from the capital markets, targeting sponsorship of a $150 million Kendall Re Ltd. (Series 2024-1) transaction.

It will be the third catastrophe bond issuance under the Kendall Re name and the fourth we have listed in our Deal Directory from Aspen, with the first having been a 2007 California earthquake cat bond named Ajax Re Ltd., which had defaulted in 2009 due to the Lehman Brothers collapse.

Aspen’s last cat bond, a $300 million Kendall Re Ltd. (Series 2021-1) deal, matures in May this year, so this new issuance appears designed to renew that retro reinsurance for the sponsor.

For this 2024-1 renewal from Kendall Re, Aspen is seeking industry-loss based collateralized retrocessional reinsurance capacity from the capital markets to support its global underwriting units.

Bermuda-based issuer Kendall Re Ltd. will look to sell two tranches of Series 2024-1 cat bond notes to investors, with the proceeds set to collateralize reinsurance agreements to protect the company.

The targeted at least $150 million of protection is split over two tranches of notes and will provide retro reinsurance to Aspen’s Bermuda unit, as well as its Lloyd’s syndicate 4711, UK company and two US underwriting units, so covers losses across the entire group as its last cat bond did.

The two tranches of Series 2024-1 notes that Kendall Re is going to issue will be exposed to losses from US named storms, including Puerto Rico, the US Virgin Islands and DC, as well as US and Canada earthquake, plus European windstorms on a weighted (state/county/Cresta) industry loss and annual aggregate basis, we are told.

PCS is providing the industry loss data for the US and Canadian named storm and earthquake risks, while PERILS AG is the data provider for European windstorm events.

We understand that there will be a franchise deductible of $30 million to take into account per-event, before a loss can count towards the annual aggregate total.

The coverage from both tranches of notes will run across a three-year term, until early May 2027 we’re told.

Kendall Re Ltd. is aiming to issue a $75 million tranche of Class A notes that will come with an initial attachment probability of 1.59%, an initial expected loss of 1.04% and are being offered with price guidance in a range from 4.5% to 5.25%.

While an also $75 million Class B tranche of notes are riskier and come with an initial attachment probability of 3.87%, an initial expected loss of 2.54% and are being offered with price guidance in a range from 6% to 6.75%, sources said.

For comparison, the Class A notes from the Kendall Re 2021-1 cat bond had an initial expected loss of 1.61% and priced for a spread of 4%, while the Class B notes had an initial expected loss of 3.32% and priced for a spread of 6.25%.

As a result, it seems the target will be to price this new Kendall Re cat bond at levels not dissimilar to the soon-to-mature deal.

With industry-loss based cat bond spreads having come in the most, of late, that seems eminently possible in the market we see today.

It’s good to learn that Aspen has returned for a second scheduled renewal of its Kendall Re catastrophe bond backed reinsurance protection.