Fidelis Insurance Group Sponsors New Herbie Re Ltd. Catastrophe Bond

Rhea-AI Summary

Fidelis Insurance Holdings Limited (FIHL) successfully closed a new catastrophe bond through its Herbie Re Ltd. program, providing $150 million of collateralized reinsurance protection. The Series 2024-1 Notes will cover insured industry losses from Named Storm and Earthquake Covered Events in the US and territories. Fidelis plans to renew the notes annually, up to four risk periods.

Insights

Financial Analyst

The issuance of the Series 2024-1 Notes by Fidelis Insurance Group represents a strategic financial move to mitigate risks associated with natural disasters. By securing $150 million in collateralized reinsurance protection, the company is effectively transferring a portion of potential losses from named storms and earthquakes to investors of the catastrophe bond. This not only diversifies their risk profile but also reinforces their capital position, which can be particularly appealing to shareholders and potential investors.

From a financial standpoint, the use of catastrophe bonds as a risk management tool can be seen as a proactive approach to capital management. It allows for a more predictable financial outcome in the event of significant insured industry losses. The ability to renew these bonds annually offers flexibility in adapting to changing market conditions and risk exposures. The transaction also reflects on the company's balance sheet, potentially improving key financial ratios and signaling financial resilience to the market.

Insurance Industry Analyst

Catastrophe bonds are a form of insurance-linked securities (ILS) that enable insurance and reinsurance companies to manage their exposure to extreme events. These bonds are an essential component of the alternative risk transfer (ART) market. The mention of 'collateralized reinsurance protection' indicates that the capital provided by investors is fully collateralized, ensuring that funds are available to cover losses from the specified events.

The reference to 'Named Storm and Earthquake Covered Events' indicates a focus on specific, high-impact perils, which are a significant concern for insurers operating in catastrophe-prone regions. By covering a broad geographic area, including the entire United States, Puerto Rico and the U.S. Virgin Islands, Fidelis is addressing a substantial portion of its potential exposure. The use of PCS (Property Claim Services) as a reporting agency for industry losses suggests a reliance on standardized industry data to trigger bond payouts, which adds a layer of transparency and objectivity to the transaction.

Risk Management Expert

The strategic employment of catastrophe bonds within Fidelis Insurance Group's risk management framework showcases an advanced understanding of leveraging financial instruments to manage catastrophic risks. The option to renew the bonds annually provides the company with operational flexibility, allowing it to adjust its risk transfer strategies in response to evolving market dynamics and its own risk appetite.

Fidelis Insurance Group's comprehensive capital management strategy, which includes quota share, excess of loss and ILWs (Industry Loss Warranties), indicates a multi-layered approach to risk mitigation. This diversified strategy is crucial for maintaining a robust defense against potential industry-wide financial impacts resulting from catastrophic events. Additionally, the involvement of Aon as the Sole Structuring Agent and Sole Bookrunner, along with legal counsel from Willkie Farr & Gallagher, underscores the complexity and importance of the transaction in the broader context of the company's financial and operational planning.

PEMBROKE, Bermuda--(BUSINESS WIRE)-- Fidelis Insurance Holdings Limited (NYSE:FIHL) (“Fidelis Insurance Group” or “the Company”) announced today that Fidelis Insurance Bermuda Limited (“FIBL”) has successfully closed a new catastrophe bond through the issuance of the Series 2024-1 Class A Principal at Risk Variable Rate Notes and the Series 2024-1 Class B Principal at Risk Variable Rate Notes (together, the “Series 2024-1 Notes”) by its Herbie Re Ltd. program (“Herbie Re”).

This is the fifth series of notes issued by Herbie Re and will provide the Fidelis Insurance Group with $150 million of collateralized reinsurance protection. The Series 2024-1 Notes issued will be exposed to insured industry losses resulting from Named Storm and Earthquake Covered Events occurring in the fifty states of the United States and the District of Columbia, Puerto Rico and the U.S. Virgin Islands, as reported by PCS, on an annual aggregate basis. Fidelis has the option to renew the Series 2024-1 Notes on an annual basis, up to a maximum of four complete annual risk periods.

Ian Houston, Fidelis Insurance Group Chief Underwriting Officer, said “Fidelis Insurance Group is excited to have in place the latest issuance under the Herbie Re Catastrophe Bond program. These bonds remain a critical component of our comprehensive capital management and outwards protection strategy, providing important capital relief and downside protection. They complement our other purchases such as quota share, excess of loss and ILWs to support the work of Fidelis MGU.”

Richard Coulson, Deputy Group Chief Underwriting Officer at Fidelis MGU, commented “We have worked in close alignment with the Fidelis Insurance Group to bring this series to market which builds on their current Herbie Re Catastrophe Bond program. This tranche of cover is the latest tool employed by Fidelis Insurance Group to enable us to capitalize on opportunities across catastrophe exposed lines of business in 2024 and beyond”.

The catastrophe bond was priced on February 15, 2024, and closed on February 22, 2024. Aon acted as Sole Structuring Agent and Sole Bookrunner for the deal. Willkie Farr & Gallagher (UK) LLP advised as counsel for Fidelis Insurance Group and Herbie Re.

About Fidelis

Fidelis Insurance Holdings Limited (NYSE: FIHL) is a global (re)insurance group, headquartered in Bermuda with offices in Ireland and the United Kingdom. Our business focuses on three pillars: Specialty, Bespoke, and Reinsurance. We manage volatility through our balanced and diversified portfolio. Our strong capital position provides us with the flexibility to engage in attractive underwriting opportunities.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240222541386/en/

Investor:

Fidelis Insurance Group

Miranda Hunter

(441) 279 2561

miranda.hunter@fidelisinsurance.com

Media:

Fidelis Insurance Group

James Dumelow

44 778 904 0954

James.Dumelow@fidelisinsurance.com

Kekst CNC

Fidelis@kekstcnc.com

Source: Fidelis Insurance Holdings Limited

FAQ

What is the latest announcement from Fidelis Insurance Holdings Limited (FIHL)?

Fidelis Insurance Holdings Limited (FIHL) successfully closed a new catastrophe bond through its Herbie Re Ltd. program, providing $150 million of collateralized reinsurance protection.

What do the Series 2024-1 Notes cover?

The Series 2024-1 Notes cover insured industry losses from Named Storm and Earthquake Covered Events in the US and territories.

How long can Fidelis renew the Series 2024-1 Notes?

Fidelis plans to renew the notes annually, up to a maximum of four complete risk periods.

Who acted as the Sole Structuring Agent and Sole Bookrunner for the deal?

Aon acted as Sole Structuring Agent and Sole Bookrunner for the catastrophe bond deal.

Which law firm advised Fidelis Insurance Group and Herbie Re in the deal?

Willkie Farr & Gallagher (UK) LLP advised as counsel for Fidelis Insurance Group and Herbie Re.