Two $20m reinsurance deals against a $236m average cat bond

Two reinsurance deals settled last week at $20m each. The average catastrophe bond issued in the second quarter of 2026 was $236m. A catastrophe bond, or cat bond, is a security that pays investors a return unless a defined disaster occurs, in which case the money goes to the sponsor to pay claims.

Two small deals, one vehicle

Both $20m issues came through Nascent Re, a Bermuda transformer, as preferred share private placements maturing in December. A transformer is a vehicle that turns reinsurance risk into securities investors can buy. A preferred share ranks ahead of ordinary shares for payments, and a private placement is sold directly to a small group of investors rather than on the open market.

Artemis, the specialist news service for insurance-linked securities (ILS), reported them on 24 September. They are the third and fourth preferred share issues from the same vehicle.

The gap is the mid-market problem

The gap between those two numbers is the whole mid-market problem, the smaller end of the market. Artemis puts traditional 144A property cat bonds at more than 99% of second quarter issuance, $11.3bn of it, and first half issuance set a record at $17.3bn. A 144A bond is one sold under a US rule that lets large institutions buy without a full public registration. Property cat bonds cover damage to buildings and other property.

The public route is where the capital is, and the public route carries a cost per transaction that does not fall when the limit does. The limit is the most the reinsurer would pay. Think of chartering a freighter: the port fees and paperwork are much the same for a full ship and a half-empty one.

Where the floor comes from

Small transactions do clear. They clear privately, with a counterparty already in place and a defined season to cover, meaning the stretch of the year the protection is meant for.

We spent part of last week looking for a published minimum economic size for an ILS deal. No broker and no rating agency publishes one. The figure people quote, about $100m, traces back to a Munich Re market report from 2012.

Nobody wrote the floor down as a rule. It is what you get when legal, collateral, administration and analytics costs are divided by the limit. Collateral here means assets set aside as security, and analytics means the modelling and pricing work behind the deal.

NextBlock RWA is building infrastructure for the bottom of that range: a minimum cession, the share of risk passed to the reinsurer, of about $5m, with the reporting handled once rather than deal by deal.

In plain words

The cost of a public deal does not fall when the deal shrinks, so small deals tend to happen privately. The often-quoted $100m floor traces back to a 2012 report. In practice it is cost arithmetic: fixed costs divided by the limit.

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