Swiss Re’s latest catastrophe bond which is still in the marketing phase to investors is due to issue $400m of notes across the three tranches which we wrote about recently here. At the time of that article it was only clear that the Mythen Ltd. cat bond would secure at least $150m of cover for Swiss Re. Now, thanks to rating information on the deal from Moody’s it’s clear that this will be a much bigger cat bond of $400m which once completed will take 2012 cat bond issuance above $3 billion to date.
We’re told that this deal may even grow beyond the $400m as it is being aggressively marketed to take advantage of current investor demand which recently saw the Everglades Re Ltd. cat bond become the largest deal ever to hit the market at $750m. We’ll update you if we here that Mythen Ltd. grows any further.
Mythen Ltd. features three tranches of notes, targeting multi-peril per-occurrence coverage for first and second event U.S. hurricanes and European windstorms. A multi-peril mix which should ensure the deal is attractive to investors. All cover from each tranche of notes is on an industry loss basis using PCS for U.S. wind and PERILS for European windstorms.
Interestingly, Swiss Re have opted to have Mythen Ltd. rated by Moody’s. They also used Moody’s for the recent Combine Re Ltd. cat bond. Moody’s haven’t been involved in many cat bond ratings in the last few years, with Standard & Poor’s generally being the rating agency of choice for any insurance-linked security transaction. It’s good for the market, and investor confidence, to see a variety of agencies being used for ratings provision.
Moody’s have assigned provisional ratings to each tranche of cat bond notes issued by Mythen Ltd. as follows. $50m Series 2012-1 Class A Principal At-Risk Variable Rate Notes due April, 2015, ‘Ba3’. $100m Series 2012-1 Class E Principal At-Risk Variable Rate Notes due April, 2015, ‘Ba3’. $250m Series 2012-1 Class H Principal At-Risk Variable Rate Notes due April, 2015, ‘B2’.
To refresh your memories; the Class A tranche of notes provide cover for U.S. hurricanes on a per-occurrence basis, using PCS reported industry losses as a trigger and an index with an attachment point of 830 and an exhaustion point of 1,085. This tranche would attach on a first event basis. The Class E tranche of notes provide cover for second and subsequent event U.S. hurricanes on a per-occurrence basis, again using PCS reported losses as a trigger and an index with an activation point of 182, an attachment point of 161 and an exhaustion point of 200. The Class E notes need two hurricanes to occur, and qualify as events, for any losses to occur. The Class H tranche of notes are multi-peril and cover European windstorms on a first event per-occurrence basis, using PERILS industry losses as a trigger and an index with an attachment point of 594 and an exhaustion point of 759. They also cover second and subsequent event U.S. hurricanes on a per-occurrence basis.
The Class A tranche of notes are expected to pay a coupon of 8.5%, Class E are expected to pay 8% and Class H are expected to pay 11%.