Arch Capital is set to recover the remainder of its $150 million of retrocessional reinsurance protection from what was its debut property catastrophe bond issuance, the global multi-peril focused .Covered aggregate losses are now understood to have eroded the remaining principal, Artemis has learned.Arch sponsored the Claveau Re catastrophe bond back at the mid-year of 2021, securing what at the time was one of the broadest global aggregate peak and secondary peril retro cat bonds in the marketplace.The cat bond provided Arch with $150 million of aggregate retro protection industry loss indexed reinsurance protection against losses from the following perils, across a four-year term, running to maturity this month.

The Claveau Re cat bond covered industry losses on an annual aggregate basis from the following perils for Arch: US & Canada named storm and earthquake; US severe thunderstorm; US wildfire; US winter storm; US Caribbean quake; Japan typhoon and earthquake; Canada severe thunderstorm; Canada winter storm; European windstorm; Italy earthquake; Turkey earthquake; Australia earthquake; Australia tropical cyclone; New Zealand quake.The notes initially attached once aggregate industry losses, after applicable franchise deductibles, reached $55 billion, while coverage was initially set to exhaust at an industry loss index level of $77.5 billion.We don’t know if the attachment and exhaustion had been adjusted at any of the annual resets for the Claveau Re cat bond.

But, what is now clear is the fact that the exhaustion point for the remaining coverage has now been reached in the latest risk period, which we’re told means Arch will benefit from the remainder of the full $150 million of recoveries available under the retrocession agreement.However, those recoveries have not been made all in one go, with the Claveau Re cat bond having originally attached a few years ago and Arch having made an initial recovery back in the 2022 to 2023 annual risk period, then further recoveries since then.We already understood that Arch had recovered just over $25 million from the 2022/23 risk period, when the Claveau Re cat bond attached for losses from a number of major global catastrophes, that included hurricane Ian and winter storm Elliott from 2022, as well as the Turkey earthquake in 2023.

Which left the remaining principal in the Claveau Re cat bond standing at around $126 million which stood until as recently as February 2024.But that figure had then reduced to $117 million of outstanding principal in the cat bond by October last year, presumably as a further small recovery was made (it’s unclear which event caused this, or whether it was loss creep from the previous period’s events).Then, earlier this year, catastrophes in the latest and what was the final annual aggregate risk period attached the cat bond’s coverage again for Arch.

We understand loss events in the latest risk period that were covered by Claveau Re included, a PCS wind and thunderstorm event in Canada, hurricane’s Helene and Milton, the California Palisades and Eaton wildfires and a PCS severe convective storm event in the United States.The outstanding principal of the Claveau Re cat bond was reduced from $117 million down to $48 million between April and the end of May in 2025, as losses from these events eroded the principal and Arch presumably benefited from recoveries, we understand.But now, at the end of June 2025, we understand a further loss notice was delivered that detailed a payout of the remaining $48 million of principal as now being due, given increased qualifying losses from these covered final risk period events, sources have told us.

As a result, the outstanding principal is set to be reduced to zero, although we’re told an extension notice has also been filed and the Claveau Re cat bond’s maturity has been moved out three months to October this year.Presumably, that extension of maturity is in case any of the loss estimates for the covered events were reduced and any principal therefore need to be repaid to investors.However, that tends to be a rare occurrence, so in this case it seems more likely investors consider the Claveau Re cat bond and their investment in it a total loss.

Arch had added to its cat bond coverage in 2024, with the $100 million issuance that also provides retrocessional protection, but this time on an occurrence basis and for North American peak perils only.Given the greater availability of aggregate limits now, including from the cat bond market, it will be interesting to see if Arch opts to return given the Claveau deal has proven effective for its coverage and has now used up its term and the available limit.You can read all about this first cat bond from Arch and every other catastrophe bond deal in our Artemis Deal Directory.

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