Zenkyoren’s new Nakama Re cat bond could be biggest ever, up to $ 775 million


Zenkyoren, Japan’s National Agricultural Cooperative Mutual Insurance Federation and one of the world’s largest buyers of disaster protection, could secure its biggest catastrophe bond ever with its latest issue, as a high-end target for the Nakama Re Pte. Ltd. (Series 2021-1) cat bond has now reached $ 775 million, from what we understand.

Zenkyoren returned to the catastrophe bond market just over a fortnight ago with a new cat bond Nakama Re through which he was targeting at least $ 500 million in earthquake protection in Japan.

This new cat bond Nakama Re is the first to be sponsored by Zenkyoren which uses Singapore as its issuing domicile, as the Japanese mutual insurance giant seeks to take advantage of the ILS grant program offer available there.

It is however encouraging to see another Asian sponsor looking for a local home and we hope to see at least some of them stay in the region when the grants are no longer available.

This is the twelfth Zenkyoren directly sponsored catastrophe bond that we have listed in our extensive transaction directory.

To date, the biggest Zenkyoren-sponsored cat bond that we have covered was two $ 700 million issues in 2016 and 2018.

From the latest information we gleaned from sources, we understand that the target size of this catastrophic Nakama Re 2021-1 bond has been raised to a range of $ 675 million to $ 775 million, which would be a record problem for Zenkyoren.

With catastrophic obligation Nakama Re Ltd. (Series 2016-1) of $ 700 million due in October, that means Zenkyoren will likely replace this expiring capital market-backed reinsurance protection.

With its latest cat bond, Zenkyoren is once again seeking protection on a three-year aggregate basis, triggered by indemnities, to cover itself against earthquake risks in Japan.

Coverage will run for almost five years until October 2026, with three annual periods of aggregate risk, each lasting three years, overlapping throughout the term.

At launch, the deal aimed to issue at least $ 400 million of Series 2021-1 Class 1 Notes, with a three-year expected loss of 2.2%, or 0.73% on an annualized basis, and these were offered to investors in cat bonds with price guidance in a range of 1.75% to 2.2%.

However, we are told that this tranche of class 1 notes is targeting between $ 500 million and $ 550 million, in terms of issue size and that the price has been set at 2.05%.

The Class 2 tranche of the Series 2021-1 Notes was launched as a $ 100 million layer, with a three-year expected loss of 3.77%, or 1.26% on an annualized basis, and a price orientation of 2.5% to 3%

Sources have told us that this tranche of Class 2 tickets is also likely to grow, with the target now at $ 175 million to $ 225 million, in terms of size and price, now set with a coupon of 2. , 75%.

It is encouraging to see that both coupons are expected to be finalized in the middle zone of guidance, rather than at the bottom, demonstrating once again that catastrophic bond funds and investors have minimum return requirements that they must reach.

We will update you as Nakama Re Pte. Ltd. (Series 2021-1) Cat bond is coming to market and you can read more about this and all other cat bond transactions in the Artemis Deal Directory.

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