Hannover Re Upsizes Acorn Re Quake Cat Bond to $450M at a 2% Spread

Hannover Re has priced its seventh Acorn Re parametric earthquake catastrophe bond at $450 million, 125% above the $200 million it sought when the deal launched on October 9, with the Class A notes priced to pay a risk spread of 2%, the bottom of the 2% to 2.25% range first offered, Artemis reported on October 26.

Hannover Re gets three years of per-occurrence parametric cover against earthquakes on the US West Coast. Oak Tree Assurance Ltd., the Vermont workers' compensation captive of the Kaiser Permanente group of health plans, is the single named ceding insurer, and the proceeds also protect exposures Hannover Re has written for other cedents inside the same parametric boxes, according to Artemis's deal reports and its Deal Directory entry.

Pricing came in the first month of a quarter in which about $2.5 billion of cat bonds mature, according to Artemis's Q3 2026 market report, which put nine-month issuance at a record $18.9 billion and recorded an eighth consecutive quarter in which 144A cat bonds priced, on average, below the midpoint of initial guidance.

Key Takeaways

Hannover Re lifted the target twice during marketing, to $350 million on October 21 and $450 million a day later, as guidance fell to 1.9% to 2%, Artemis reported.
Investors take a 2% spread on a 0.78% expected loss, a 2.56x multiple, against 2.35% and 2.45x on the $240 million Acorn Re 2025-1 notes.
A 125% upsize compares with an average 31.5% increase while marketing for the Q3 2026 144A tranches in Artemis's quarterly report.
Hannover Re pays 2% on $450 million of Acorn Re limit, against 3.1% in October 2024, cutting the annual risk spread from $13.95 million to $9 million.
Acorn Re's spread above expected loss is 1.22 points, against a 3.97% average for Q3 2026 issuance and 3.98% for the first nine months of the year, per Artemis.

How the book built

Acorn Re Ltd., a Bermuda special purpose insurer, launched the Series 2026-1 notes on October 9 with a $200 million target and spread guidance of 2% to 2.25%, a multiple of 2.72 times the 0.78% initial expected loss at the midpoint, Artemis reported that day, with an initial attachment probability of 0.96%. Marsh Securities is sole structuring agent and bookrunner and RMS is the risk modelling agent, according to the Deal Directory.

On October 21 Artemis reported that the target had been lifted 75% to $350 million and the guidance narrowed to 2% to 2.15%. A day later the target rose again, to $450 million, and the guidance was cut to 1.9% to 2%. On October 26 the notes priced at 2%, the top of the final range and the bottom of the range first offered, in what Artemis called "strong catastrophe bond price execution" in a softened reinsurance market.

At 2%, the final spread is 5.9% below the 2.125% midpoint of initial guidance. Artemis's Q3 2026 report put the average price change from the initial midpoint at minus 8.2% for the quarter's 144A tranches, after minus 10.2% in the second quarter, with eight of ten tranches pricing below the midpoint. Average size growth while marketing was 31.5% in the third quarter and 31.6% in the second, and two third-quarter tranches doubled. Acorn Re's 125% increase is four times the quarterly average.

Acorn Re series	Final size	Expected loss	Initial guidance	Final spread	Multiple
2023-1	$150M	0.91%	n/a	4.35%	4.78x
2024-1	$450M in two $225M tranches, target $400M	0.88%	3.5% to 4.1%	3.1%	3.52x
2025-1	$240M, target $200M	0.96%	2.5% to 2.9%	2.35%	2.45x
2026-1	$450M, target $200M	0.78%	2% to 2.25%	2%	2.56x

Sources: Artemis pricing reports of October 28, 2024, October 20, 2025 and October 26, 2026, the October 9, 2026 launch report and the Artemis Deal Directory. Acorn Re 2023-1's size is from the launch report; its initial guidance is not restated in the later reports. Class A of 2024-1 carried three years of protection and Class B one year.

Four years of falling coupons

Across four consecutive October issues the Acorn Re coupon has fallen from 4.35% in 2023 to 3.1% in 2024, 2.35% in 2025 and 2% this year, according to Artemis's pricing report on each deal, while the expected loss moved between 0.78% and 0.96%. On the same $450 million of limit Hannover Re placed in October 2024, the annual risk spread has gone from $13.95 million to $9 million.

This year's multiple went the other way. At 2.56 times expected loss the 2026-1 notes sit above the 2.45 times on 2025-1, which Artemis had called the lowest in the series. Artemis attributed the rise to the lower expected loss and to investors' minimum return requirements, not to a change in market pricing conditions. Earlier deals carried multiples of 2.8 times in 2021, 3.4 times in 2018 and 4.3 times in 2015, per Artemis's October 2025 report.

On spread above expected loss, the figure an ILS investor compares across risks, Acorn Re pays 1.22 percentage points. Artemis's Q3 report puts the market average at 3.97% for the quarter and 3.98% for the first nine months of 2026, down from 5.01% in the first nine months of 2025 and 7.06% in the same period of 2023. Across the first nine months the average multiple was 2.4 on an average expected loss of 2.85%; Acorn Re's higher multiple sits on an expected loss less than a third of that.

A third-quarter average multiple of 2.27 was down 0.57 year on year and below 3 for a fifth consecutive quarter, which the report called a further signal of reinsurance market softening, notably in property catastrophe. Only once before, in the second and third quarters of 2021 during the previous soft cycle, had the spread above expected loss spent two consecutive quarters below 4%, the report said.

What the notes cover

Protection is per-occurrence and parametric. An earthquake of sufficient magnitude inside the defined grid pays a share of the notes on a sliding scale set by magnitude and location, with a minimum payout of 25%, according to the Deal Directory. California is the main focus: southern California accounts for about 72% of the expected loss and the northern, central and southern San Andreas faults for more than half. Beyond California the box extends to Oregon, Washington, Nevada, Utah, Arizona, British Columbia, Baja California, Sonora and certain offshore Pacific areas.

Proceeds collateralise retrocession agreements between Acorn Re and Hannover Re, which in turn reinsures Oak Tree Assurance and applies the cover to other reinsureds with exposure inside the box, Artemis reported. Oak Tree has benefited from all seven Acorn Re deals, according to the Deal Directory.

Acorn Re's $150 million 2023-1 notes mature this November, Artemis noted at launch, so the new issue adds $300 million of net limit to the program. With the $225 million three-year Class A tranche of 2024-1 and the $240 million multi-year 2025-1 notes still running on the terms Artemis reported for each deal, Hannover Re enters November with $915 million of Acorn Re parametric earthquake limit in force.

Risk periods on the new notes run annually from November 1, 2026 to the end of October 2029.

Hannover Re Upsizes Acorn Re Quake Cat Bond to $450M at a 2% Spread

Key Takeaways

How the book built

Four years of falling coupons

What the notes cover

Further Reading

Sources