Covea Reinforces Catastrophe Protection with Innovative €200M Bond
Strategic Expansion of Catastrophe Reinsurance Portfolio
Covea Group, the esteemed French mutual insurer, is making its return to the catastrophe bond arena with its fifth such transaction. The current endeavor seeks to secure a minimum of €200 million in comprehensively collateralized reinsurance coverage. This new issuance, named Hexagon IV Re Ltd. (Series 2025-1), is specifically designed to broaden the scope of protection, incorporating both occurrence-based and aggregate-based formats for covering wind and hail-related damages.
Evolution of Covea's Catastrophe Bond Issuance History
The company's journey in the catastrophe bond market has seen a dynamic evolution in its issuing locations. Its initial two catastrophe bonds originated in Ireland. Subsequent issuances saw a shift, with a 2021 transaction domiciled in Singapore, and the most recent 2023 deal being issued from Bermuda through a special purpose insurer designated Hexagon Re IV Ltd. The existing Hexagon IV Re 2023-1 catastrophe bond continues to provide Covea Group with €145 million in multi-year catastrophe reinsurance, extending through the end of 2027, specifically for windstorm losses in France, Monaco, and Andorra.
Introduction of Hexagon IV Re 2025-1: Enhanced Coverage
The latest addition to the Hexagon series, the Hexagon IV Re 2025-1 catastrophe bond, signals a significant expansion of capital markets-backed reinsurance. This new offering not only maintains coverage for windstorm losses but also integrates hail and other windstorm-related perils. The bond is structured into two distinct tranches of Series 2025-1 notes, which will be offered to insurance-linked securities (ILS) investors, with the proceeds collateralizing a reinsurance agreement between the issuer and Covea Group entities.
Detailed Structure of the New Catastrophe Bond Tranches
The objective for this Hexagon Re IV 2025-1 catastrophe bond is to provide at least €200 million in fully-collateralized coverage for windstorms, hail, and other specified perils across France, Monaco, and Andorra. One tranche consists of indemnity per-occurrence notes, offering four calendar years of protection. A second tranche will provide indemnity annual aggregate protection over a two-calendar-year period, with a slightly more focused range of covered perils.
Class A Notes: Per-Occurrence Protection
The Class A tranche, targeting €150 million, offers indemnity-triggered per-occurrence protection. This covers losses from windstorms, hail, and additional perils, including certain snow-related impacts. The coverage duration for these notes spans four years, from early 2026 to the close of 2029. The protection for Class A notes activates at €625 million in losses, covering up to €1.025 billion, with an initial attachment probability of 4.28% and an expected loss of 2.97%. Pricing guidance for these notes is between 5.5% and 6%.
Class B Notes: Annual Aggregate Protection
The Class B tranche, aiming for €50 million, provides indemnity-triggered annual aggregate reinsurance protection exclusively for windstorms and hail events, excluding other peril categories. This coverage will extend for two years, from the beginning of 2026 to the end of 2027. These annual aggregate notes feature a €200 million event deductible and a €50 million cap per qualifying event. The Class B notes' protection attaches at €50 million in losses, covering up to €100 million, with an initial attachment probability of 1.47% and an expected loss of 1.16%. The price guidance for these notes is between 6.5% and 7%.
Market Diversification and Continuous Reinsurance Strategy
This new Hexagon IV Re 2025-1 catastrophe bond offers investors an opportunity for diversification, both geographically and in terms of perils, given its focus on European catastrophe risks. Covea Group's sustained engagement with catastrophe bonds underscores its commitment to leveraging capital markets for robust reinsurance protection. It is also noted that the junior €53 million Hexagon III Re Pte. Ltd. (Series 2021-1) Class B tranche had previously seen markdowns due to potential losses from a November 2023 European windstorm, though prices have since shown some recovery.
