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Feb 2024

Asia Pacific: Healthy investor appetite for catastrophe bonds

Source: Asia Insurance Review | Oct 2022

The redemption and new issuances of property catastrophe bonds covering perils in Asia in the year to 30 June 2022 suggest a healthy investor appetite for Asia catastrophe bonds, said Aon.
In its report, “Alternative Capital: Growing Markets”, Aon noted that four Asian-based sponsors came to market during the period and explored the acceptability of structures through a new domicile, untested models and reporting mechanisms.
After three consecutive years of economic losses greater than $100bn (2018-2020), the total economic losses in Asia-Pacific for 2021 were $78bn.
The below-average losses were mainly due to a quiet tropical cyclone season and lower flooding damages. However, insurers in APAC recorded aggregated losses of $9.4bn, which was 31% below the 21st-century average and 57% below the decadal average. Compared to the US and EMEA, the protection gap remained a challenging issue in APAC as insurance covered just 12% of the economic losses in the region.
In September 2021, Zenkyoren returned to the capital market by issuing two tranches totalling $775m covering Japanese Earthquake. The Notes from newly established Singapore-based SPV, Nakama Re (Series 2021-1) is a three-year aggregate, indemnity trigger, with a term of up to five years. Both tranches were priced at the mid-point of guidance and is the largest issuance to date by Zenkyoren.
Also in September 2021, the first cat bond was issued out of Hong Kong by state-owned sponsors, China Property & Casualty Reinsurance Company. The $30m Greater Bay Re (Series 2021) was issued as a zero-coupon Note and provides China Re with a single year of retro reinsurance protection against losses from Chinese typhoon.
With the maturity of Japanese cat bond Akibare Re (Series 2018), sponsors MS&AD looked to issue two series of Notes Tomoni Re Pte Ltd (Series 2022-1) in March protecting individual entities Mitsui Sumitomo Insurance and Aioi Nissay Dowa Insurance from Japanese Typhoon and Flood. Tomoni Re settled $220m for two per occurrence tranches priced at the upper end of guidance. This was also the first issuance using an updated AIR Touchstone version 9.
The second Hong Kong domiciled cat bond issuance, Black Kite Re (Series 2022-1) was issued in June 2022, structured as a single-tranche industry loss trigger over three years to provide Japanese Typhoon cover for Peak Re. This was the first cat bond which uses CRESTA CLIX loss index. Pricing was 20%–30% above initial guidance. A 
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