Manatee Re 2016 cat bond hits $95m, pricing set towards upper levels

by Artemis on March 3, 2016

Florida located U.S. primary insurer Safepoint’s latest catastrophe bond, the Manatee Re Ltd. (Series 2016-1) deal, is set to achieve $95m of collateralised reinsurance cover for the firm after the pricing on the now two tranches of notes were fixed towards the upper end of initial guidance.

The latest cat bond from Safepoint Insurance Company has not had the easiest of times in the market, sources said, with questions around the inuring reinsurance layers and replacement coverage for the Florida Hurricane Catastrophe Fund (FHCF) being raised.

The result was the removal of the Class B tranche from the issuance, which would have sat alongside the insurers FHCF reinsurance cover (perhaps helping it to reduce its reliance on that facility), while the pricing on the remaining two tranches moved upwards.

The Class A tranche of notes, which began life with a preliminary size of $50m and price guidance of 4.75% to 5.5%, which was subsequently revised upwards to 5% to 5.5%, has now been priced at an upsized $75m with pricing fixed at 5.25%, we understand.

Meanwhile the much higher risk Class C tranche has not increased in size, remaining at the $20m since launch. However the pricing on this risky layer, one of the riskiest to hit the cat bond market in some time, has been set at the top-end of initial guidance in response to investor demand for a coupon commensurate with the risk.

The Class C notes were launched with price guidance of 15.25% to 16.25%, which was subsequently narrowed towards the top-end at 16% to 16.25%. At final pricing this $20m tranche has been fixed at 16.25%, based on investor feedback and demand we’re told.

So Safepoint has secured $95m of capital markets-backed reinsurance protection for some of its Florida and Louisiana named storm risks.

Investors appear to have been reluctant to support this transaction at the lower pricing levels, but Safepoint has recognised the value of including the capital markets and the 144A catastrophe bond in its reinsurance program and so has priced the deal.

Safepoint’s Manatee Re Ltd. (Series 2016-1) catastrophe bond is due to complete next week. You can read all about this and every other cat bond in the Artemis Deal Directory.

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