The pricing guidance for the lowest risk of the three tranches of notes being issued through the Manatee Re Ltd. (Series 2016-1) catastrophe bond deal has been revised upwards according to sources, as investors again show a minimum return expectation for catastrophe risks.
Safepoint Insurance Company, the expansive Florida primary insurer returned to the catastrophe bond market with a $100 million, triple-tranche Manatee Re 2016-1 cat bond seeking to expand its capital markets backed reinsurance protection recently.
The three tranches will provide the insurer with a targeted $100m of collateralised reinsurance protection against losses from Florida and Louisiana named storms. Last year’s Manatee Re 2015 cat bond was Florida wind only, as Safepoint has been expanding its business scope and now requires broader coverage.
The Manatee Re 2016-1 cat bond will provide its named storm reinsurance protection across a three-year term, to March 2019, with protection on a per-occurrence basis and using an indemnity trigger.
The cat bond remains $100 million in size, we’re told, but the price guidance for the lower risk Class A tranche of notes has been revised upwards, likely on the back of investor feedback.
The Manatee Re 2016-1 cat bond is a relatively complex transaction, with three tranches providing tiered protection across the Safepoint reinsurance program tower.
The Class A tranche remains sized at $50m and the coverage would attach at $30m of losses above Safepoint’s FHCF participation reinsurance cover, covering a $200m layer. That effectively means a $306m attachment point and $506m exhaustion point.
The Class A tranche, with its attachment probability of 1.92% and expected loss of 0.98% at the base case were initially marketed with price guidance of 4.75% to 5.5%.
But that pricing has been revised up with the notes now marketed with a coupon range of 5% to 5.5%.
Investors are once again demonstrating that they will not accept any risk at any price and have minimum return expectations they need to meet. The structure of the tranche positioning above the FHCF layer may also have had a bearing in the pricing being revised up.
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