Bermudian reinsurer RenaissanceRe’s first broadly marketed 144A catastrophe bond, Mona Lisa Re Ltd. (Series 2013-2), has increased in size while marketing and the indicative interest spread pricing has moved to the middle of the range originally marketed. It’s not the first cat bond issued by Mona Lisa Re but it is the first broadly marketed one from RenRe.
With the Mona Lisa Re 2013-2 cat bond RenRe is looking to transfer a portion of its U.S. hurricane and earthquake risk to capital market investors. Mona Lisa Re Ltd., a Bermuda domiciled special purpose insurer, will issue a single tranche of Series 2013-2 notes to collateralize a reinsurance agreement with two sponsors, RenaissanceRe and DaVinci Re.
With this cat bond RenaissanceRe will benefit from a fully-collateralized source of named storm (tropical storm and hurricane) coverage for the U.S. hurricane exposed states and Puerto Rico as well as earthquake coverage for the U.S. The protection from the cat bond will be afforded by a PCS based industry loss trigger on a state weighted annual aggregate basis. The notes cover losses from an attachment point of $875m to an exhaustion point of $1.125 billion over a four-year risk period.
The transaction began marketing as a $125m tranche of notes but we understand that it has increased by 20% to now offer a $150m tranche. At the same time the deal has priced at the mid-point of the originally marketed range of 7% to 7.6% and the notes now offer investors a 7.3% coupon.
Ratings agency Standard & Poor’s gave the single tranche of notes a preliminary rating of ‘BB-(sf)’.
RenaissanceRe’s cat bond is due to settle next week. It will be interesting to watch whether this becomes a more regular occurrence for the reinsurer and whether it chooses to cede risk to the capital markets via catastrophe bonds as part of its risk transfer strategy again.
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