Convex Group, the expansive global specialty insurance and reinsurance underwriter, has returned to the catastrophe bond market and has an initial target to secure $200 million or more in retrocession from its third catastrophe bond sponsorship, a Hypatia Ltd. (Series 2026-1) issuance, Artemis can report.
Convex then returned in 2023 and secured $150 million of industry loss triggered retrocession with a Hypatia 2023-1 issuance.
That 2023 issuance has recently matured, so this Series 2026-1 takedown under Hypatia Ltd. may be considered a replacement and upsized right from the launch, it appears.
Convex followed that up to secure a further $150 million of retro from a 2025-1 issuance under Hypatia Ltd. last June.
As a result, Convex currently has just the $150 million from its Series 2025-1 Hypatia cat bond in-force, so it’s good to see the re/insurer back and looking to expand on its capital markets retrocession.
Just like its previous cat bond sponsorships, this Series 2026-1 Hypatia cat bond issuance sees Convex seeking additional coverage for the same perils and in the same format as previous deals, being retrocessional protection for the peak North American perils of hurricane and earthquake risks, on an industry loss triggered basis.
We’re told that Hypatia Ltd., Convex’s Bermuda based special purpose insurer (SPI), is offering investors a single tranche of Series 2026-1 cat bond notes, with an initial target of $200 million or greater for the issuance.
Convex Re, the Convex group reinsurance entity, is again the ceding entity, but we understand the cat bond will also cover subsidiary entities, such as Convex’s UK and European insurers.
The Hypatia 2026-1 catastrophe bond will provide Convex Re with retrocessional reinsurance, just like the first three cat bond arrangements.
The $200 million or greater in Series 2026-1 Class A notes that Hypatia is aiming to issue will be exposed to losses from U.S. named storms, including Puerto Rico, D.C and the US Virgin Islands, and both U.S., those territories and Canadian earthquake events, we are told.
The notes will provide Convex with annual aggregate retro protection for major loss events caused by these perils, structured using a weighted PCS industry loss index trigger, and the coverage will run across a roughly three year term with maturity expected in May 2029, sources said.
Sources said that the $200 million of Hypatia Ltd. Series 2026-1 cat bond notes will provide Convex with aggregate industry loss based retro reinsurance, after an attachment point of $150 billion of losses, covering a share up to $200 billion, with a $10 billion franchise deductible set to be enforced.
As a result, the Hypatia Series 2026-1 Class A notes will come with an initial attachment probability of 2.87%, an initial base expected loss of 2.26% and they are being offered to investors with price guidance for a spread of between 4.75% and 5.25%.
If we compare this to the recently matured Hypatia 2023-1 cat bond, that had an initial expected loss of 2.52% and priced to pay investors a spread of 9.5%, so paid a spread multiple-at-market of almost 3.77 times EL.
Last year’s Hypatia Ltd. Series 2025-1 Class A notes were riskier and came with an initial base expected loss of 4.48%, pricing to pay investors 8.5%, so for a spread multiple of just under 1.9 times the expected loss, which was a notably low multiple at the time.
This new, Series 2026-1 cat bond from Hypatia Ltd. for Convex, if priced at the mid-point of guidance, would be paying investors a spread multiple of 2.2 times the expected loss. Which perhaps indicates there is every chance this new issuance prices down for the sponsor, when you compare it to last year’s deal.
Wherever it prices, it’s encouraging to see Convex returning and looking to upsize on its in-force catastrophe bond protection.
You can read all about Convex’s fourth catastrophe bond, this Hypatia Ltd. (Series 2026-1) transaction, and almost every other cat bond ever issued in the Artemis Deal Directory.
