Zenkyoren cat bond renewal affirms Singapore’s growing ILS stature: Clifford Chance

The fact giant reinsurance buyer Zenkyoren, the Japanese National Mutual Insurance Federation of Agricultural Cooperatives, has elected to renew a catastrophe bond in Singapore, marking its second transaction located in the country, is a “strong affirmation” of the growing stature of the insurance-linked securities (ILS) hub.

In total, almost $4.5 billion in insurance-linked securities (ILS) have been issued out of Singapore, since the country put in place its regulatory regime and launched its special purpose reinsurance vehicle (SPRV) structure.

Artemis returns to Singapore on July 11th for our ILS Asia 2024 conference. Please register here if you’d like to join us.

The almost $4.5 billion in ILS issued out of Singapore since 2019, includes over $4.31 billion in 144A catastrophe bonds across 24 issuances and a further $162 million from four Phoenix quota share sidecar note issuances sponsored by MS Amlin Asia Pacific.

This year, Singapore has seen its first catastrophe bond renewals.

Notably, all three cat bonds issued out of the country so far this year is from a repeat sponsor reusing a structure domiciled there to access capital markets backed reinsurance capacity.

Singapore has seen repeat sponsors before, but not renewals that occur using the same SPRV structure, until 2024 that is.

Hear more about Singapore’s activities in cat bonds and ILS at our upcoming conference, ILS Asia 2024..

The $450 million of catastrophe bonds issued in Singapore so far this year all come from Japanese sponsors, Zenkyoren, Tokio Marine and Mitsui Sumitomo.

Clifford Chance acted on the recent $150 million Nakama Re Pte. Ltd. (Series 2024-1) cat bond from Zenkyoren, providing advice to initial purchaser Aon Securities, the investment banking arm of the insurance and reinsurance broker.

Zenkyoren is among the buyer’s of the largest reinsurance programs in the world, so it’s notable that the mutual insurer continues to utilise catastrophe bonds and has elected to leverage Singapore’s position in the region for its recent issuances.

For Clifford Chance, the Nakama Re 2024-1 cat bond transaction was jointly led by partners Will Winterton in London, Lena Ng in Singapore, and Gareth Old in New York, working alongside a deal team that spanned New York, London, and Tokyo offices.

Partner Lena NG commented that, “Zenkyoren’s decision to return to Singapore for its 2024 catastrophe bond issuance through its special purpose reinsurance vehicle is a strong affirmation of Singapore’s growing stature as a leading hub for Insurance-Linked Securities (ILS) in Asia.

“This move not only highlights the sophisticated infrastructure and conducive regulatory environment that Singapore offers but also underscores the confidence that global entities like Zenkyoren place in the region’s capacity to support complex financial instruments.”

Partner Will Winterton added, “We are proud to have advised Aon Securities on this significant catastrophe bond issuance. This transaction demonstrates the continued interest in the ILS market, and we are pleased to have provided our legal expertise to its success.”

Singapore’s success in catastrophe bonds continues and renewals are a strong vote of confidence, as sponsors tend to quickly shy away if their experience is not conducive to staying within a regulatory location.

Of course, there is also the ILS grant offering that Singapore makes available to ILS sponsors from the region and for those ceding regional risks, which assists, but more important to Singapore is encouraging sponsors back time and again, to build their confidence in the regime there, while growing the experience of the service providers in the country.

That is what makes for a more smooth experience for sponsors, which will tend to encourage them back, so the three renewals of cat bonds through their same SPRV’s is a notable milestone for Singapore, we feel.

Artemis returns to Singapore on July 11th for our ILS Asia 2024 conference. Please register here if you’d like to join us.