Tokio Marine launches novel earthquake cat bond with SDB

This is the first time proceeds will be used to boost SDG goals through an SDB.

Tokio Marine Holdings’ subsidiary Tokio Marine & Nichido Fire Insurance has sponsored the issuance of a catastrophe bond, the "Kizuna Re III Series 2024-1 Class A Principal At-Risk Notes," covering earthquake risks in Japan. 

The bond is backed by a SOFR-based Sustainable Development Bond (SDB) issued by the World Bank Group's International Bank for Reconstruction and Development (IBRD), it said in a press statement last week.

The company said this is the first instance of a Japanese insurer utilising the proceeds from a catastrophe bond to support sustainable development goals through an SDB.

ALSO READ: Tokio Marine beefs up APAC property underwriter team

The Kizuna Re III cat bond, issued through the special purpose reinsurance vehicle Kizuna Re III Pte. Ltd. in Singapore, offers a novel risk transfer mechanism. 

In the event of earthquake-related losses exceeding a predetermined threshold in Japan, funds will be directed towards reinsurance claim payments, thereby reducing the principal amount repayable to investors at maturity.

The principal raised from qualified institutional investors will then be invested in IBRD's SDB, supporting impactful projects and programs across IBRD member countries.