US primary insurer The Hanover Insurance Group, Inc. has returned to the catastrophe bond market for what will be its third time, but this $150 million Commonwealth Re Ltd. (Series 2025-1) issuance is its first to target multi-peril reinsurance protection, Artemis understands.
Previously, The Hanover has sponsored two catastrophe bonds under the Commonwealth Re program in 2022 and 2023, but both of those were focused only on the provision of fully-collateralized named storm reinsurance across just US northeast states.
This third Commonwealth Re catastrophe bond sees The Hanover looking for expanded reinsurance protection, both through the inclusion of more perils, but also a US nationwide coverage approach, we are told.
You can read about all of The Hanover’s catastrophe bonds by filtering our Deal Directory by sponsor.
What we’ve learned is that, using Bermuda-based special purpose insurer Commonwealth Re Ltd., The Hanover Insurance Group is seeking at least $150 million in US-wide multi-peril and multi-year reinsurance protection from the capital markets, on a fully-collateralized basis with this third cat bond issuance.
Commonwealth Re Ltd. will issue a single tranche of Series 2025-1 Class A notes that are designed to provide reinsurance to The Hanover for the perils of US named storm, earthquake, severe thunderstorm, winter storm and wildfire, we are told.
Protection will be on an indemnity trigger and per-occurrence basis, with the reinsurance running across three years from July 1st through to the end of June 2028, we understand.
Sources said that the proposed $150 million of Series 2025-1 Class A notes that Commonwealth Re is offering will have an initial attachment point at $1.1 billion of losses and exhaust their coverage at $1.25 billion in the reinsurance tower, or above that if the cat bond is upsized.
Which gives the $150 million or more in Class A notes an initial attachment probability of 1.13%, an initial base expected loss of 1.02% (which is subject to change should the cat bond grow and span a larger layer of the tower, we are told) and they are being offered to investors with price guidance for a spread of between 4% and 4.5%, we understand.
It’s encouraging to see The Hanover returning for its third catastrophe bond and even more so to see the insurer looking for expanded protection, across more of the United States.
The firm’s 2022 cat bond, which was northeast named storm only, is set to mature soon, which indicates that with expanded coverage from this third issuance, cat bonds will become a more integral component of The Hanover’s reinsurance arrangements with this deal.
You can read all about this Commonwealth Re Ltd. (Series 2025-1) catastrophe bond from The Hanover and every cat bond transaction ever issued in the extensive Artemis Deal Directory.
