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The first ever Green Cat Bond
Generali successfully priced last June 25, 2021 a € 200m Catastrophe Bond (“Lion III Re DAC Notes”)[1]. This is the first ever Green Cat Bond sponsored by an insurance company. Natixis acted as Sole Green Coordinator and Joint Bookrunner.
Innovative features
The Green ground-breaking features of the transaction are the following:
- The investment of the collateral in assets with a positive environmental impact (EBRD Notes issued under its framework for Environmental Sustainability Bonds), and
- The allocation of the solvency capital released towards eligible “green assets” & inherently green forms of insurance business (“green policies” as Property & Casualty business for both retail and corporates), as defined within Generali’s pre-published Green ILS framework[2].
Sustainable insurance & extreme climate risk mitigants
This transaction targets both asset side (green investments) and liability side (insurance policies) making it the very first capital management & re-insurance product. Hence, leveraging from Generali’s commitments to likely increase in the near future premiums from green and social insurance policies and increase its ability to tag and channel freed up capital towards “green eligible policies”[3].
This structure is a concrete & innovative capital management tool for a sector that will face an escalating frequency and severity of extreme weather due to climate change. Covering both asset and liability side captures physical risk (investments) and liability risk (insurance companies and policy holders), which are increasingly scrutinized by Regulators, especially through Climate Stress Testing as initiated by the EIOPA[4].
The transaction was extremely well received with a pricing at 350 bps making it one of the tightest prints in Insurance Liability Securities (ILS) market. With more than 20 investors involved, the Lion III Re DAC Notes have been well oversubscribed receiving 1.15x final coverage and interesting feedbacks from ISR/green targeted investors.
[1] Generali's press release "Lion III RE: First green catastrophe Bond sponsored by Generali" (June 2021) , available here.
[2] Generali, "Green Financial Management", available here.
[3] Natixis, "Natixis breaks new ground with placement of first-ever green catastrophe bond sponsored by Generali" (June 2021), available here.
[4] EIOPA, "Consultation Paper on draft Opinion on the supervision of the use of climate change risk scenarios in ORSA" (October 2020), available here.
