Kin secures new $100m Hestia Re cat bond at ~11% price discount
Kin Insurance has now successfully secured its new Hestia Re Ltd. (Series 2023-1) catastrophe bond to provide $100 million of collateralized reinsurance protection and with spreads now finalised just over 11% below the initial mid-point of price guidance.
This visit to the capital market has resulted in particularly strong execution for the direct-to-consumer homeowners insurtech, as Kin has seemingly prioritised price over volume for its second cat bond sponsorship and the end result is testament to the cat bond investor communities’ acceptance of the still-growing company.
Kin returned to the catastrophe bond market in February, seeking $100 million or greater in fully-collateralized and multi-year Florida named storm reinsurance protection from the capital markets.
The size of the issuance has not changed throughout its issuance and now Kin has secured that targeted $100 million layer of reinsurance against hurricanes in the state of Florida.
Now having been priced, the $100 million of Hestia Re 2013-1 Class A cat bond notes will provide Kin with a three-year source of fully-collateralized Florida named storm reinsurance, on an indemnity trigger and per-occurrence basis.
The Hestia Re 2023-1 Class A cat bond notes will have an initial base expected loss of 1.04% and initial attachment probability of 1.36%.
The Hestia Re 2023-1 cat bond notes would attach at $110 million of losses and exhaust at $310 million, inuring to other layers in Kin’s reinsurance tower (such as the FHCF coverage), we understand.
Based on a projection of its 2023 reinsurance arrangements, we understand that Kin expects the new Hestia Re cat bond will sit at approximately $531 million of losses and LAE in its tower, with RAP, FHCF and other private market reinsurance all inuring to the benefit of the new cat bond.
While the cat bond was not upsized, it is the pricing that tells the story of strong execution for Kin.
At their initial launch, the Hestia Re 2023-1 Class A notes were offered to cat bond investors with price guidance in a range from 10.5% to 11.5%.
As we then reported, the price guidance was lowered to below that range, with a target set for the cat bond deal to settle paying investors a spread in the 10% to 10.5% range.
But that price guidance was then changed again, with the range lowered further and a spread target of between 9.75% to 10%, as we reported earlier this week.
Now, we can report that the spread has been fixed at the bottom-end of that already reduced guidance, to pay investors 9.75% over the risk-free return of the collateral.
That’s just over 11% below the initial pricing guidance mid-point, indicating a strong result and strong investor demand for the notes.
Kin will be delighted with the reinsurance support it has secured from the cat bond market with its latest Hestia Re issuance, with the decline in pricing meaning the reinsurance cover this cat bond will provide has come in more cost-effective than it was originally expected to be.
The notes will still pay investors an almost 9.4 times multiple of expected loss, far higher than Kin’s previous Hestia cat bond from 2022 which priced to pay investors a multiple of 4.8 times EL despite being a riskier layer of the reinsurance tower.
So Kin has paid a higher price, commensurate with the hard reinsurance market environment, for its new cat bond, but it was not as high as initially thought likely to be, indicating strong support from the cat bond investor community for the insurer.
You can read all about the Hestia Re Ltd. (Series 2023-1) catastrophe bond from Kin and every other cat bond deal issued in our extensive Artemis Deal Directory.