Safepoint lifts Manatee Re II 2018 cat bond to $200m, pricing drops

by Artemis on March 26, 2018

The latest catastrophe bond from U.S. primary insurer Safepoint Insurance Company has increased in size while marketing, as the sponsors multi-peril Manatee Re II Ltd. (Series 2018-1) cat bond has grown to $200 million while pricing for both of its tranches has now been fixed at the bottom of guidance.

In what looks set to be another successful and keenly priced cat bond issue, Safepoint’s Manatee Re II 2018 cat bond has been upsized by 21%, from the $165 million the cat bond was launched at, to now securing $200 million of fully collateralized reinsurance for the insurer.

This Manatee Re II cat bond will secure a three-year $200 million source of fully-collateralized reinsurance protection for Safepoint, covering losses from the perils of U.S. named storms and U.S. severe thunderstorms. The protection will be for the states of Florida, Louisiana and Texas initially, with the ability to expand at annual resets if the sponsor chooses.

Two tranches of notes are to be issued by the recently registered Bermuda domiciled special purpose insurer (SPI), Manatee Re II Ltd., which have been offered to qualified investors in order to collateralize the underlying reinsurance agreements with the insurer.

The Manatee Re II 2018 cat bond will provide Safepoint with reinsurance coverage on an indemnity trigger basis and the structure has been designed as a cascading and per-occurrence arrangement, with coverage able to drop down if the underlying stated reinsurance layers are eroded by loss events.

The first tranche of notes began as a $125 million Class A layer of notes, the less risky of the two. This tranche, which has an expected loss of 1.08%, has been increased in size to $160 million, we’re told. At the same time the pricing of this tranche of notes dropped to the bottom of the initial coupon price guidance of 4.25% to 4.75%, being fixed now at 4.25%, our sources said.

The second and riskier tranche began as a $40 million layer of Class B notes, with an expected loss of 4.07%, and the size of this layer has not changed. However investors demonstrated their appetite still, with the initial price guidance of 7.75% to 8.5% falling to the bottom end of guidance and the coupon now fixed at the lowest end at 7.75%.

So for Safepoint the issuance looks set to be very successful, with the amount of reinsurance secured from the capital markets up 21%, while the pricing fell to the bottom of guidance for both layers of risk.

The issuance of this cat bond was delayed slightly, as we explained last week, which now means settlement for the deal is set for April and so it falls into second-quarter issuance, instead of first.

You can read all about this Manatee Re II Ltd. (Series 2018-1) catastrophe bond and every other cat bond transaction in the Artemis Deal Directory.

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