Zenkyoren’s new catastrophe bond the first ever to use ADB note as collateral asset
The recent $100 million Nakama Re Pte. Ltd. (Series 2025-1) catastrophe bond sponsored by Zenkyoren, the Japanese National Mutual Insurance Federation of Agricultural Cooperatives, was the first ever cat bond issuance to utilise bonds issued by the Asian Development Bank (ADB) as collateral assets.
Being a fully-collateralized reinsurance arrangement to provide Zenkyoren with multi-year protection against earthquakes in Japan, we understand the proceeds from the sale of the $100 million Nakama Re 2025-1 catastrophe bonds will initially be invested in an Asian Development Bank (ADB) note.
Zenkyoren has utilised the ADB note as a collateral asset for its latest catastrophe bond issuance as the sponsor sees this as a responsible investment aligned with its sustainability policy.
The cat bond sponsor communicates its sustainability efforts to investors in its issuances and noted that many institutional investors in catastrophe bonds are interested in its efforts towards meeting sustainable development goals (SDG’s).
Zenkyoren explained, “In accordance with the Association’s “Sustainability Policy,” which aims to contribute to the sustainable development of agriculture and local communities and to fulfill its social role as a member of the local community, the Association is committed to responsible investment, which consists of ESG investment and stewardship activities, in order to contribute to solving social issues such as climate change while securing investment income.
“Many institutional investors who invest in cat bonds are highly interested in the sponsor’s efforts toward SDGs and responsible investment, and the Association has disclosed the above efforts to investors in past issuances, and has used bonds issued by IBRD and EBRD, which have a proven track record, as collateral assets.
“Based on the above, for this cat bond issue, we will utilize the ADB, which issues bonds with the aim of “realizing a rich, inclusive, resilient and sustainable Asia-Pacific region while continuing to work to eradicate extreme poverty”.”
With this use of ADB bonds as the permitted investment for the collateral from its latest Nakama Re 2025-1 catastrophe bond issuance, Zenkyoren noted it has become the first to do so, and also the first cat bond sponsor to utilise IBRD, EBRD and ADB notes across cat bond issues.
On the use of ADB bonds, Zenkyoren added, “This is the biggest feature of the cat bond to be issued this time, and it will be the first such initiative in the world.”
The sponsor added, “JA Zenkyoren will continue to strive to maintain sound management, meet the trust and expectations of our members and users, and provide them with “peace of mind” and “satisfaction”.”
Increasingly, with the use of bonds from these development focused international financial institutions the catastrophe bond market has elevated the sustainability aspects of cat bond issues.
Cat bonds using such collateral assets can see their proceeds supporting sustainable development projects around the world, through the note principal conversion into notes issued by development banks.
It’s been a positive development in the market and one welcomed by many investors, which can serve to enhance the attractiveness of the asset class among certain allocators and institutional investors.
As such, it’s encouraging to see another collateral option from an additional development bank, the ADB, utilised in a catastrophe bond issuance for the first time.
You can read all about this Nakama Re Pte. Ltd. (Series 2025-1) catastrophe bond and every other cat bond transaction in the Artemis Deal Directory.
