Nakama RE’s Singapore Listing: A Strategic Move for Catastrophe Risk Financing

Nakama RE Pte. Ltd., the Singapore-based special purpose reinsurance vehicle (SPRV) of Japan’s National Mutual Insurance Federation of Agricultural Cooperatives (Zenkyoren), has filed for a $100 million catastrophe bond issuance due April 2030. This move underscores the growing role of Singapore as a hub for insurance-linked securities (ILS) and highlights Zenkyoren’s long-term strategy to hedge against Japanese earthquake risks. The bond, structured as a five-year instrument with overlapping three-year risk periods, offers investors a novel exposure to natural catastrophe risk while benefiting from regulatory incentives in Asia’s emerging ILS market.

Bond Structure and Financial Terms

The Series 2025-1 bond aims to secure reinsurance protection for Zenkyoren, covering losses from Japanese earthquakes, tsunamis, fires, flooding, and sprinkler leakage via an indemnity trigger mechanism. Key terms include:
- Attachment and Limit: The bond triggers at JPY 2.15 trillion of losses and covers up to JPY 2.4 trillion.
- Deductible: An aggregate franchise deductible of JPY 270 billion ensures losses below this threshold are not covered.
- Expected Loss: 0.74%, with an annualized attachment probability of 0.77%, signaling a low likelihood of payout.
- Spread: Priced at 2.1%, near the lower end of its 2.1%–2.25% guidance—below the 2.35% spread on its 2024-1 bond—reflecting strong investor demand.

The five-year term, structured across three overlapping three-year risk periods, ensures continuous coverage until April 2030. This aligns with Zenkyoren’s April reinsurance renewal cycle, reducing the need for frequent refinancing.

Singapore’s Strategic Role in ILS

This is Nakama RE’s third Singapore-domiciled issuance (following 2021 and 2024), leveraging the Monetary Authority of Singapore’s (MAS) regulatory framework for SPRVs. Key advantages include:
1. Cost Efficiency: The ILS grant scheme covers up to 100% of issuance costs (up to SGD 2 million), reducing Zenkyoren’s outlay.
2. Market Access: Singapore’s status as an ILS hub attracts global capital, with the 2025 issuance adding to Nakama RE’s $1.15 billion in outstanding bonds.
3. Regulatory Certainty: As a registered SPRV, Nakama RE operates under MAS’s stringent rules, ensuring bankruptcy remoteness and robust risk management.

Risk Profile and Investor Appeal

The bond’s low expected loss and competitive spread position it as a yield-driven instrument for investors seeking diversification. Key attractions include:
- Low Correlation: Catastrophe bonds typically offer low correlation with traditional asset classes.
- Structured Transparency: The indemnity trigger mechanism and detailed risk parameters reduce information asymmetry.
- ESG Alignment: While not explicitly labeled “green,” the bond supports disaster resilience—a key ESG theme—potentially broadening its appeal.

Despite the lack of an explicit credit rating (common in ILS transactions), the bond’s structure relies on actuarial modeling and collateralization, reducing reliance on traditional ratings.

Regulatory and Market Context

Singapore’s ILS ecosystem has grown rapidly, with the MAS extending its grant scheme through 2025 to support Asia-focused risk transfers. The 2025-1 bond’s success—priced at 2.1%—reflects investor confidence in its risk metrics and Singapore’s regulatory environment.

Conclusion

Nakama RE’s 2025-1 bond issuance marks a strategic milestone in Asia’s ILS landscape. By leveraging Singapore’s favorable regulations and cost incentives, Zenkyoren secures cost-effective reinsurance while offering investors a yield-enhancing asset. With the global ILS market expanding—$12.1 billion in cat bonds issued in H1 2024 alone—the transaction highlights Singapore’s growing influence.

Crucially, the bond’s terms—low expected loss, competitive spread, and extended coverage—align with Zenkyoren’s risk management goals. As the 2021-1 bond ($775 million) matures in 2026, this issuance sets the stage for potential upsizing in future deals. For investors, the bond’s low correlation and structured risk make it a compelling addition to portfolios, even without an explicit rating. In a world where natural catastrophe risks are escalating, Nakama RE’s Singapore listing exemplifies how innovative structures can balance protection, yield, and regulatory efficiency.