Mystic Re III Ltd. closes successfully and notes listed on CSX

by Artemis on March 7, 2012

Mystic Re III Ltd., the latest catastrophe bond sponsored by U.S. insurer Liberty Mutual, closed successfully at an upsized $275m and the notes from the transaction have been listed on the Cayman Islands Stock Exchange. The cat bond, which is Liberty Mutual’s fifth transaction, began life as a $150m deal with two tranches of $75m aiming to secure the sponsor cover for U.S. hurricanes and earthquakes on an indemnity trigger, per occurrence basis. It nearly doubled in size due to demand before it closed.

The two tranches of Series 2012-1 notes both grew in size, the Class A notes which attach at $2.1 billion of losses grew to $100m in size, while the lower layer and more risky Class B notes tranche which attach at $1.3 billion of losses doubled to $175m. Both tranches were admitted to the official list on the CSX along with the specialist debt programme which would allow Liberty Mutual to issue further notes over the next five years if they chose.

The notes will cover Liberty Mutual’s losses from hurricanes and earthquakes, including fire following, in the covered area on a per-occurrence basis. The covered area for hurricane is the following states: Alabama, Arkansas, Connecticut, Delaware, Florida, Georgia, Hawaii, Illinois, Indiana, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Mississippi, Missouri, New Hampshire, New Jersey, New York, North Carolina, Ohio, Oklahoma, Pennsylvania, Rhode Island, South Carolina, Tennessee, Texas, Vermont, Virginia, West Virginia, and the District of Columbia. The covered area for earthquake is all 50 states and the District of Columbia, though the Class A notes will not cover California earthquakes.

Standard & Poor’s assigned ratings of ‘BB’ and ‘B’ to the Series 2012-1 Class A and Class B notes, respectively.

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