MAPFRE RE has entered the catastrophe bond market for the first time in its history, sponsoring the issuance of a bond through Recoletos Re DAC, a special purpose vehicle based in Ireland.
The bond is structured to provide multi-year retrocession protection from January 2025 to December 2027, aimed at bolstering the company’s reinsurance arrangements, MAPFRE Re said.
Catastrophe bonds, often referred to as "cat bonds," are financial instruments that offer insurers and reinsurers collateralized protection as an alternative to traditional reinsurance solutions. They enable risk transfer to capital markets while providing investors with access to insurance-linked securities.
The inaugural issuance under this program, labeled Series 2024-1, offers MAPFRE RE coverage for catastrophic losses from tropical storms and hurricanes in the United States. Coverage is triggered by reported industry losses and operates on an annual aggregate basis.
AON Securities served as the structuring agent for the issuance, collaborating with GC Securities on its placement. MAPFRE Re noted that strong investor demand led to the bond being upsized to US$125 million from the initial US$100 million target. Pricing was also adjusted downward as a result of this demand.
MAPFRE RE CEO Miguel Rosa (pictured above) stated that the new protection allows the company to grow its business in the US and diversify its sources of reinsurance.
“We’re very satisfied with this new protection because it enables us to expand our business in the United States and diversify our sources of reinsurance, which strengthens our position in the global market,” Rosa said.
Catastrophe bonds provide an additional reinsurance mechanism for insurers and reinsurers. For institutional investors, these instruments offer exposure to a diversifying asset class with potential for attractive returns, without requiring the establishment of an insurance entity.
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