VKB, a prominent German insurance group, is reportedly expanding the scope of its latest catastrophe bond offering, aiming to procure a larger €200 million in German multi-peril reinsurance coverage. This augmented target for the King Max Re II DAC (Series 2026-1) transaction signifies an increased ambition to bolster its protective measures.
This issuance marks a significant return for Versicherungskammer Bayern Versicherungsanstalt des oeffentlichen Rechts (VKB) to the catastrophe bond market in October, representing a strategic renewal of its inaugural €175 million King Max Re DAC 2023 cat bond, which is set to mature in early January 2027.
Initially, VKB had sought to secure €175 million in multi-peril reinsurance through the King Max Re II Series 2026-1 deal, intending to fully replace its expiring catastrophe bond protection. Subsequent developments revealed VKB's efforts to achieve reduced pricing for this latest transaction, with the spread guidance for the notes undergoing downward adjustments.
Reports now indicate that VKB is seeking to obtain additional German multi-peril reinsurance protection from investors. The revised target for the King Max Re II DAC (Series 2026-1) has been elevated to €200 million.
The King Max Re II DAC is now offering a single €200 million tranche of King Max Re II Series 2026-1 Class A notes to investors. These notes are structured to provide VKB Re, the sponsoring reinsurer, with indemnity and per-occurrence triggered reinsurance protection against a range of perils, including earthquakes, hailstorms, floods, and windstorms in Germany. The coverage spans a three-year term, commencing on January 1st, 2027.
The €200 million King Max Re II Series 2026-1 Class A cat bond notes carry an initial expected loss of 1.68%. Initially, the notes were offered to investors with a price guidance spread between 3% and 3.25%, which was subsequently lowered to a range of 2.5% to 3%. The price guidance has since been further refined to a 2.75% spread, positioning it at the midpoint of the revised range.
It appears that VKB is poised to join the ranks of sponsors benefiting from the robust investor interest in the catastrophe bond market. The company is likely to secure greater protection than originally planned, with pricing anticipated to settle below initial projections.
