Fidelis’ seeks 25% upsize for first catastrophe bond Herbie Re

Fidelis Insurance Holdings Limited, the specialty insurance and reinsurance firm, is seeking to upsize its first catastrophe bond transaction Herbie Re Ltd. (Series 2020-1) by as much as 25%, with the target lifted to $125 million for the deal but the pricing now lifted to the upper-end of guidance.

Fidelis entered the catastrophe bond market for the first time just over a fortnight ago, launching its first catastrophe bond sponsorship with an at the time $100 million Herbie Re 2020-1 transaction.

The offering aims to secure Fidelis a source of capital markets backed multi-peril collateralised retrocessional reinsurance on a second event basis, a form of coverage not so commonly seen in the cat bond market these days.

In order to be triggered and cause a payout of investor principal, the Herbie Re 2020-1 catastrophe bond would have to face two qualifying catastrophe events causing an industry loss index trigger to rise above a pre-defined level during a single risk period.

Herbie Re will therefore provide similar coverage to a second-event industry loss warranty (ILW), protecting Fidelis against more than one major U.S. natural catastrophe loss event occurring during a single year.

Thanks to investor support, we now understand that Fidelis is seeking to upsize its first catastrophe bond by as much as 25%, with Herbie Re set to issue up to $125 million of Series 2020-1 Class A notes that will be exposed to potential industry losses from U.S. named storms and U.S. earthquakes, with Puerto Rico, the U.S. Virgin Islands and District of Columbia also covered areas.

The reinsurance protection that the Herbie Re cat bond will provide to Fidelis will run across a four-year term and coverage is on an industry loss and per-occurrence basis, for second-events that occur.

The now up to $125 million tranche of Series 2020-1 Class A notes to be issued by Herbie Re Ltd. have a base expected loss of 2.39% and were initially offered to cat bond funds and investors with coupon price guidance in a range from 8.5% to 9%.

We’re told that the pricing has moved to the top-end of that guidance, with the notes likely to pay investors a coupon of 9%.

It’s encouraging to see this catastrophe bond proceeding as planned for Fidelis, with a chance of upsizing.

It’s always good to see new sponsors enter the market, especially with a different form of coverage, being second-event.

Accessing the capital markets with this Herbie Re Ltd. catastrophe bond will provide Fidelis an efficient source of hedging capacity, as well as a way to bring more efficient capital within its core business to expand its underwriting capacity and ability to do more in the United States market, a key area of growth in this firming market.

You can read all about this new Herbie Re Ltd. (Series 2020-1) catastrophe bond in the Artemis Deal Directory and we’ll update you as the transaction proceeds to market.