Korean Re raises $75M via second Solomon Re catastrophe bond
What's the deal? Korean Re, the South Korean reinsurer, has secured $75 million in multi-peril retrocession through its second catastrophe bond, Solomon Re Ltd. (Series 2026-1). The bond was issued in two tranches: a $50 million Class A tranche covering US named storms, US earthquakes, and Israel earthquake risks, and a $25 million Class B tranche covering only US perils. Both tranches span three years.
The Class A notes priced at a 4.75% spread — the top end of initial guidance — while the Class B notes priced at 7.75%, the bottom end. Hannover Re is fronting the capital markets arrangement.
Why now? Korean Re first entered the cat bond market nearly three years ago with a $75 million Solomon Re 2023-1 issuance covering only US named storm and earthquake risks. This new deal renews and extends that retrocession while broadening coverage to include Israel earthquake risk — a peril rarely seen in catastrophe bond markets.
The Class A tranche uses an industry-loss trigger for US perils and a parametric trigger for Israel earthquake risk. The Class B tranche relies solely on an industry-loss, per-occurrence trigger for US risks.
What could go wrong? The split pricing tells a story. Class A notes, which bundle the unusual Israel earthquake exposure, priced at the top of guidance — suggesting investors demanded a premium for the less familiar peril. Class B notes, covering well-understood US risks at a higher expected loss of 4.03%, priced at the bottom of guidance, reflecting stronger investor appetite.
Israel earthquake risk remains a niche market with limited historical data for modelling, which could make future renewals more sensitive to geopolitical or seismic developments.
The signal: Korean Re's successful return to the cat bond market at its full target size shows growing confidence among capital markets investors in non-traditional perils and emerging-market reinsurers. The inclusion of Israel earthquake risk signals that sponsors are testing investor appetite for geographic diversification beyond the dominant US wind and quake exposures that dominate the cat bond market. If deals like this keep getting done at target size, expect more reinsurers to push the boundaries of what perils the capital markets will absorb.
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