Long Point Re III 2013-1 catastrophe bond doubles in size, drops in price

by Artemis on May 7, 2013

Another catastrophe bond has increased in size while being marketed and has also seen its price guidance reduced, following the trend of larger and more keenly priced cat bonds that has been the feature of the 2013 cat bond market so far. The Long Point Re III Ltd. (Series 2013-1) deal is U.S. insurer Travelers fourth cat bond transaction and the second under its Long Point Re III Cayman Islands domiciled SPV.

The Series 2013-1 cat bond issuance will see Long Point Re III Ltd. issue a single tranche of cat bond notes designed to protect Travelers against hurricanes in northeastern U.S. states on an indemnity and per-occurrence basis. It’s a very similar deal to its Long Point Re III Ltd. (Series 2012-1) from last year so with this latest cat bond Travelers are placing more of their reinsurance program with the capital markets.

The 2013-1 tranche of cat bond notes are riskier than last years 2012-1 issuance. The 2012 deal had an Ultimate Net Loss (UNL) attachment point of $2 billion, while this 2013 cat bond has an attachment point of $1.25 billion and an exhaustion point of $1.8 billion.

We understand from sources in the cat bond market that Long Point Re III 2013-1 has doubled in size from the initial volume of $150m that it was marketed at to now offer $300m of notes in this issuance. That’s a healthy increase in size for Travelers and is larger than the $250m cat bond it issued last year. It’s not Travelers largest cat bond though as both 2007’s Longpoint Re Ltd. and 2009’s Longpoint Re II Ltd. were $500m in size.

At the same time as doubling in size, the deal has also had its price guidance lowered down to the bottom end of the marketed range. When it launched, Long Point Re III 2013-1 had a coupon price range of 4% to 4.75%. We’re told that it is now marketed with a price of 4%, making this deal even better value for Travelers.

So another cat bond grows in size and cheapens in price for its sponsor as it takes advantage of the investor appetite for cat bonds. Interestingly, last years Long Point Re III 2012-1 deal priced at 6% for a less risky tranche of notes, which shows how cat bond pricing has changed in just one year with this riskier tranche of notes pricing a third cheaper at just 4%.

Long Point Re III Ltd. (Series 2013-1) is expected to price later this week and complete next week. We’ll keep you updated to any changes as it comes to market and full details on the transaction can be found in our Deal Directory.

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