A new catastrophe bond issuance has been launched to benefit two Japanese insurance carriers owned by MS&AD Insurance Group Holdings, with the Tomoni Re Pte Ltd. (Series 2022-1 & 2022-2) transaction aiming to secure the sponsors a multi-year source of collateralized Japanese typhoon and flood reinsurance protection.
The ultimate beneficiaries of the reinsurance that the Tomoni Re 2022 catastrophe bond will provide are set to be Mitsui Sumitomo Insurance Co. Ltd. and Aioi Nissay Dowa Insurance Co., Ltd., both of which have been sponsors or beneficiaries of catastrophe bond backed reinsurance protection before.
Tomoni Re Pte Ltd. is a newly registered Singapore based special purpose reinsurance vehicle, as MS&AD continues to leverage the country as its domicile for catastrophe bond issuance, having sponsored its last Akibare Re cat bond there.
We understand from sources that this new Tomoni Re cat bond is a little complicated, in terms of some of the structuring decisions taken, presumably to try to design the cover to benefit two sponsors with differing needs, while matching the reinsurance protection as closely as possible to their traditional towers.
Tomoni Re Pte Ltd. will issue two series of notes, a Series 2022-1 and a Series 2022-2 issuance, with each Series also having two tranches sitting beneath.
The overall size of the issuance is targeted at $240 million or more, with the protection set to be afforded on an indemnity trigger basis and across a roughly four-year term to early April 2026, we’re told.
The coverage from all four tranches of notes will be against certain losses caused by typhoons and floods in Japan.
On to the series and tranches, which are a little more complex than typical cat bonds. All four tranches are currently sized at $60 million each, for the $240 million total.
A Series 2022-1 Class A-1 tranche of notes will provide Mitsui Sumitomo with per-occurrence reinsurance protection, have an initial expected loss of 0.38% and we understand are being offered to cat bond investors with price guidance in a range from 1.9% to 2%.
A Series 2022-1 Class B-1 tranche of notes will provide Aioi Nissay Dowa with per-occurrence protection, have an initial expected loss of 1.37% and are being offered to investors with coupon guidance of 2.5% to 2.75%.
A Series 2022-2 Class A-2 tranche of notes will provide Mitsui Sumitomo with annual aggregate reinsurance protection, have an initial expected loss of 0.55% and are being offered with price guidance of 2.25% to 2.75%.
Finally, a Series 2022-2 Class B-2 tranche of notes will provide Aioi Nissay Dowa with protection on a two-year aggregate basis, have an initial two-year expected loss of 1.87%, annualised at 0.93%, and are being offered with coupon guidance of 2.75% to 3.25%, we’re told.
So this Tomoni Re Pte catastrophe bond will provide MS&AD Holdings insurance carriers with broad reinsurance protection from the capital markets against losses from Japanese typhoons and floods.