Tokio Marine prices $100m Kizuna Re quake cat bond at low-end of guidance

Tokio Marine & Nichido Fire Insurance Co. Ltd., the giant Japanese primary insurance group, has now secured the targeted $100 million Kizuna Re III Pte. Ltd. (Series 2024-1) of earthquake reinsurance from its latest catastrophe bond, with the coverage priced at the low-end of initial guidance.

There had been a push to reduce the pricing further, but it seems in this case the cat bond market held back and secured pricing within the original guidance, albeit at the bottom of it.

As we had been reporting, this is the ninth catastrophe bond we have listed in our extensive Deal Directory to benefit part of the Tokio Marine Holdings group of companies and this is now the sixth cat bond in the Kizuna Re series of deals.

The Japanese insurance carrier is again sponsoring its Kizuna Re catastrophe bond issuance out of Singapore, the second time it has used that country as issuing domicile.

Being an Asian sponsor and with Asian risk coverage featured in this new cat bond, it seems that Tokio Marine should benefit from the Singapore ILS grant scheme, helping to make this issuance even more efficient for the sponsor.

Through this Kizuna Re III Pte. Ltd. Series 2024-1 catastrophe bond, Tokio Marine & Nichido Fire Insurance will benefit from a three-year rolling aggregate and indemnity trigger based source of collateralized earthquake reinsurance protection, across a five year term.

At launch to the investor community, the target was already for $100 million of reinsurance from this new Kizuna Re III 2024-1 cat bond.

That target has now been achieved, we are told by sources, with Tokio Marine securing the full $100 million target for reinsurance.

However, the issuance had been targeting much keener pricing, as the guidance had subsequently been dropped.

The $100 million of Series 2024-1 Class A cat bond notes that Kizuna Re III Pte. Ltd. will issue come with an initial expected loss of 1.59% on a three-year basis (0.53% annualised).

The $100 million of Class A notes were originally offered to catastrophe bond investors with pricing guidance of 2.75% to 3.25%, but that range was updated and lowered to offer new price guidance of 2.5% to 2.75%.

We are now told that the $100 million of Class A notes eventually priced to pay investors a 2.75% risk spread, so at the low-end of the initial price guidance range.

That is good to see, as it shows cat bond investors sticking to their desire to earn a minimum return, even for a very remote-risk and diversifying layer of cat bond notes like this.

With pricing declining across many catastrophe bond issues of late, this does at least show that the market remains disciplined and wants to earn a reasonable return.

However, the multiple-at-market is lower than the 2021 Kizuna earthquake cat bond from Tokio Marine, which had an initial annualised expected loss of 0.33% and priced to pay investors a 2% spread.

You can read all about this new Kizuna Re III Pte. Ltd. (Series 2024-1) catastrophe bond transaction and every other Tokio Marine sponsored cat bond in our Artemis Deal Directory.