Tokio Marine returns with new $100m Kizuna Re quake cat bond using SDB

Japanese insurance giant Tokio Marine Holdings has returned to the cat bond market with the issuance of a $100 million Kizuna Re III Series 2024-1 transaction, which is being issued out of Singapore, providing the company with collateralised reinsurance protection against earthquake risks Japan. It has become the first Japanese carrier to make use of SOFR-Based World Bank Sustainable Development Bond.

Tokio Marine & Nichido Fire Insurance, the property and casualty subsidiary of Tokio Marine, has sponsored its ninth catastrophe bond. It offers the insurer with collateralised quake reinsurance protection on a three-year rolling aggregate and indemnity trigger basis, with a maturity date of April 6, 2029.

Proceeds from the sale of the Kizuna Re III catastrophe bond will be invested in a SOFR-based Sustainable Development Bond (SDB) issued by the World Bank Group’s International Bank for Reconstruction and Development (IBRD), “rather than money-market funds”. This marks the first instance of a Japanese insurer investing in SOFR-based bonds since IBRD notes transitioned from LIBOR to SOFR.

The Japanese carrier highlighted that its decision to use an SDB is part of its commitment to “accelerating its efforts to take climate action, improve disaster resilience, and protect the natural environment”.

Tokio Marine’s said: “By electing to utilise a SDB as collateral for the Kizuna Re III cat bond is supporting the achievement of sustainable development goals and contributing to the realisation of a sustainable society.”

“As a part of “improving disaster resilience” in one of the most disaster-prone countries in the world, TMNF has continuously utilised catastrophe bonds, in addition to purchasing traditional reinsurance capacity,” it said.

The catastrophe bond was issued by the special purpose reinsurance vehicle Kizuna Re III Pte incorporated in Singapore and offered and sold to qualified institutional investors. 

In the event of earthquake losses in Japan exceeding a predetermined threshold, the excess amount will be used to make reinsurance claim payments to Tokio Marine & Nichido Fire Insurance, thereby reducing the principal amount that would otherwise be repaid to investors at maturity of the Kizuna Re III cat bond. 

The principal amount raised from qualified institutional investors will be invested in an SDB issued by IBRD to fund projects, programmes, and activities in member countries, aimed at achieving positive social and environmental impacts and outcomes.

Did you get value from this story?  Sign up to our free daily newsletters and get stories like this sent straight to your inbox.