Cranberry Re 2017-1 cat bond targets $250m for Massachusetts MPIUA

by Artemis on May 15, 2017

A new catastrophe bond has been launched for the Massachusetts Property Insurance Underwriting Association (MPIUA), with Hannover Re acting as sponsor through its Hannover Rück SE entity. The Cranberry Re Ltd. (Series 2017-1) issuance targets a $250 million source of reinsurance for the MPIUA.

The MPIUA is a wind pool property insurer for those unable to access traditional insurance markets in the state of Massachusetts and has been the beneficiary of catastrophe bond protection in the past with a 2010 deal Shore Re Ltd. that matured in 2013 and a Cranberry Re Ltd. (Series 2015-1) that matures in June 2018.

This Cranberry Re 2017-1 cat bond will extend the protection from the 2015 deal, we’re told, as it seeks a similar fully-collateralized source of reinsurance protection against losses from State of Massachusetts named storms (so tropical storm and hurricane risks), severe thunderstorms and winter storms.

Cranberry Re will issue a single tranche of Series 2017-1 Class A notes, currently targeting a deal size of $250 million, with the notes set to be sold to ILS investors and the proceeds used to collateralize a retrocessional reinsurance agreement between the issuer Cranberry Re Ltd. and the sponsor Hannover Re. Hannover Re in turn provides the reinsurance protection to the MPIUA.

The reinsurance protection that will benefit the MPIUA will be on an indemnity trigger and annual aggregate basis across a three-year term to the end of June 2020.

This Cranberry Re 2017-1 cat bond is lower risk than the 2015 deal and will see the MPIUA topping its reinsurance tower with cat bond protection from the capital markets.

The $250 million of notes issued will have an initial attachment point at $1.7 billion of losses to the MPIUA and exhaust at $2.1 billion, so with a $400m layer there is plenty of room for this cat bond to upsize if demand supports it. This results in an initial attachment probability of 0.532% and an expected loss of 0.464%.

The Cranberry Re 2017-1 cat bond notes are being offered to ILS investors with coupon price guidance in a range from 2% to 2.5%, sources said.

We understand that the majority of the expected loss of this cat bond is related to named storm risks, with the severe thunderstorm and winter storm risks just minor contributors to the risk profile of the notes.

This transaction is slated for completion in early June and we’ll keep you updated as it comes to market.

You can read all about the Cranberry Re Ltd. (Series 2017-1) catastrophe bond and every other deal in the Artemis Deal Directory.

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