Convex Group, the specialty insurance and reinsurance company, has now secured its latest catastrophe bond to provide the 50% upsized $150 million of capital markets retrocession from the new Hypatia Ltd. (Series 2025-1) issuance, with the spread priced 17% below the mid-point of the initial guidance range.
In our first update, we reported that the size target for this third catastrophe bond under Hypatia Ltd. for Convex had risen to between $125 million and $150 million, while the price guidance was updated below the initial range.
Then, in our second update, we noted that the target size for this Hypatia 2025-1 catastrophe bond had been set at the upper-end of $150 million, while the price guidance had been revised and lowered once again, indicating strong market appetite and the potential for favourable execution.
Now, we’re told that Convex has achieved the larger offering size for its latest and third catastrophe bond sponsorship, while the notes were priced to pay investors a spread roughly 17% below the mid-point of its initial price guidance range.
The now confirmed to be $150 million of Hypatia Series 2025-1 Class A notes will provide protection for the peak North American perils of hurricane and earthquake risks, on an industry loss trigger and annual aggregate basis over a three-year term, covering Convex Re, the Convex group reinsurance entity, as well as subsidiary entities.
The $150 million of Hypatia Ltd. Series 2025-1 Class A notes come with an initial base expected loss of 4.48%.
To show how the pricing for the notes for this Hypatia Ltd. (Series 2025-1) issuance had fallen, they were first offered to investors with price guidance for a spread of between 10% to 10.5%, but that was then updated to a range of 9% to 10% in the first update we learned for this deal.
Then, in our second update the price guidance had been reduced again, with a spread of 8.5% to 9% being offered to investors.
We have now been told that the notes have been priced for a spread of 8.5% to be paid, so the bottom of the twice reduced range, representing a roughly 17% decline in price from the mid-point of the initial price guidance.
Because the notes were priced at the bottom end of the revised range, the spread multiple-at-market comes in at just under 1.9 times the expected loss, a notably low figure.
This indicates that there was strong demand within the market for Convex’s third catastrophe bond, perhaps also for industry-loss trigger cat bonds too which have tended to price at lower multiples in many cases.
This is a strong result for Convex, reflecting both investor confidence in the sponsor and effective execution of the deal in the capital markets. Securing the full upsized target of $150 million at reduced pricing demonstrates solid demand for the transaction.
As a reminder, you can read all about Convex’s third catastrophe bond, this Hypatia Ltd. (Series 2025-1) transaction, and almost every other cat bond ever issued in the Artemis Deal Directory.
