MS&AD Insurance Group Holdings is seeking approval for an early redemption of its most recently sponsored catastrophe bond, the $200 million issuance, as the reinsurance needs of its two main insurance entities that are the beneficiaries of the cat bond will change after their merger completes.The Japanese insurance giant sponsored the Tomoni Re 2024-1 catastrophe bond in March 2024, securing a $200 million multi-year source of fully-collateralized reinsurance from the capital markets for its two main insurance entities, Mitsui Sumitomo Insurance Co.Ltd.and Aioi Nissay Dowa Insurance Co., Ltd.

The cat bond provides structured protection against certain losses from the perils of Japanese typhoons, floods and earthquakes over a term that should have run until the end of March 2028.The cat bond came with two tranches of notes, one designed to protect each of the aforementioned insurance subsidiaries, Mitsui Sumitomo Insurance and Aioi Nissay Dowa Insurance.The Tomoni Re 2024-1 cat bond was also , given the Class B notes, for Aioi Nissay Dowa, provide the insurer shared limit coverage for both indemnity and per-occurrence reinsurance for Japanese typhoons and floods, and also rolling 3-year aggregate reinsurance for Japanese earthquake losses.

Innovation aside in the structuring of the Tomoni Re catastrophe bond, the situation has now changed for its sponsor, driving a request for an early redemption of the notes and their reinsurance coverage, we are told.Back in March 2025, .That merger is scheduled to complete in April 2027, but it has ramifications for the Tomoni Re 2024-1 catastrophe bond, given the structure provides its coverage separately to each of the insurers, through a tranche being dedicated to each, while its maturity is not due until almost a year after the merger is expected to be completed.

Because of this, we’re told MS&AD Insurance Group has requested a change to the indenture terms of the catastrophe bond, to allow for an early redemption of the $200 million of notes.Sources said the proposed change to the indenture suggests a 1% of principal repayment would compensate investors in the notes for their early redemption, under the proposed change to terms.Apparently, MS&AD said that the request for the early redemption terms to be incorporated is because after the merger completes, and the insurers become Mitsui Sumitomo Aioi Insurance Company in 2027, their reinsurance needs are expected to have changed.

The combined reinsurance buying of the two insurers likely requires a complete redesign of the reinsurance towers that have been in place for the company, meaning any multi-year protection will need to be restructured to better meet the combined entities needs.With the Tomoni Re 2024-1 cat bond having been structured to provide coverage across two tranches, one for each of the MS&AD insurers, it’s clear this would need to change once the insurance subsidiaries combine their businesses and portfolios.As a result, the request to incorporate an early redemption option into the terms of the catastrophe bond makes perfect sense and the fact this is possible speaks to the flexibility of the cat bond structure, with sponsors having the ability to request noteholders allow amendments to terms during the period of coverage.

There is another $220 million catastrophe bond also still in-force, but this one is scheduled to mature in April 2026, hence the reinsurance protection from that deal is expected to run its course as initially planned with the merger completion still a year away at that time.You can read all about the   catastrophe bond and every other cat bond transaction ever issued in the extensive Artemis Deal Directory..All of our Artemis Live insurance-linked securities (ILS), catastrophe bonds and reinsurance can be accessed online.

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