RenaissanceRe’s Mona Lisa Re cat bond completes, receives broad investor support

by Artemis on July 12, 2013

The first broadly marketed 144A catastrophe bond from Bermuda based reinsurer RenaissanceRe has now completed successfully, providing the reinsurer with a $150m source of multi-year retrocessional U.S. hurricane and earthquake reinsurance protection. Mona Lisa Re Ltd. (Series 2013-2) has now settled, received its full rating and listed in Bermuda.

While this is the first cat bond from RenaissanceRe to be marketed with a book to multiple investors, it is not the first cat bond issuance from the reinsurer this year, or indeed from its Mona Lisa Re Ltd. special purpose insurance vehicle. A Series 2013-1 issuance was privately placed with a single investor earlier this year, believed to be a transaction undertaken directly with Swiss based ILS investment manager LGT.

With this Mona Lisa Re 2013-2 cat bond RenRe has transferred a portion of its named storm (so hurricane and tropical storm) and earthquake (with fire following) risks to capital market investors. Mona Lisa Re Ltd., a Bermuda domiciled special purpose insurer, has issued and sold a single $150m tranche of Series 2013-2 notes to collateralize an underlying reinsurance agreement with the two sponsors, RenaissanceRe and RenRe’s joint-venture reinsurance vehicle DaVinci Re.

The transaction launched as a $125m tranche of notes but investor demand helped it to increase by 20% to $150m. At the same time the pricing dropped from a marketed range of 7% to 7.6% to complete offering investors a 7.3% interest spread.

The notes cover losses from an attachment point of $875m to an exhaustion point of $1.125 billion over a four-year risk period and the deal features a PCS based industry loss trigger on a state weighted annual aggregate basis.

We understand that investors were pleased to see a RenaissanceRe sponsored cat bond being marketed more widely and the deal received strong support from a broad range of investors.

The mix of investors the deal was placed with includes; dedicated ILS and catastrophe funds making up 61% of the cat bonds placement, hedge funds at 27%, larger institutional investors such as pension funds and endowments at 6%, other asset managers at 6% and reinsurers at 1%. The investors were, we understand largely U.S. based with 82% of those participating in the cat bond transaction based there. 16% of the investors were European and another 3% were based in Asia.

The Mona Lisa Re Ltd. principal at risk variable rate note program and the single tranche of $150m Series 2013-2 notes issued in this cat bond have both been admitted for listing on the Bermuda Stock Exchange. Prime Management Ltd. acted as listing sponsor.

Ratings agency Standard & Poor’s assigned its ‘BB-(sf)’ rating to the $150m Class A, Series 2013-2 notes issued by Mona Lisa Re Ltd.

You can read much more about this catastrophe bond in the entry for Mona Lisa Re Ltd. (Series 2013-2) in our Deal Directory. It will be interesting to see whether cat bonds become a regular part of RenRe’s risk transfer and reinsurance capital management activities.

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