The Hanover gets Commonwealth Re cat bond at 20% upsized $150m

The Hanover Insurance Group has now finalised its new Commonwealth Re Ltd. (Series 2023-1) catastrophe bond issuance to secure the 20% upsized target for $150 million of protection, while pricing the notes at the bottom-end of initial guidance.

The Hanover returned to the catastrophe bond market in May, with a $125 million target for its second Commonwealth Re catastrophe bond.

With this new issuance, the insurer is expanding its catastrophe reinsurance arrangements with the help of insurance-linked securities (ILS) investors.

The target size had been increased to a $150 million issuance of notes and we’re now told that this is the level of protection this new cat bond has been finalised at for The Hanover.

As a result, once settled, this new Commonwealth Re 2023-1 catastrophe bond will provide The Hanover with $150 million of per-occurrence reinsurance protection from the capital markets, covering it against certain losses from Northeast US named storms.

The reinsurance protection from the notes is structured on a multi-year and fully-collateralized basis, using an indemnity trigger, running across a three year term running to maturity at July 8th 2026.

The $150 million of Class A cat bond notes that will now be issued come with an initial base expected loss of 0.57%.

The notes were first offered to investors with spread price guidance in a range from 4% to 4.5%, which was subsequently narrowed to a range of 4% to 4.25% and we’re now told the spread has been finalised at the low-end of 4%.

That reflects a roughly 6% drop in pricing from the initial mid-point of guidance, while the notes will pay investors a multiple-at market of the expected loss of roughly 7 times.