Swiss Re Insurance-Linked Fund Management

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Cranberry Re Ltd. (Series 2017-1)

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Cranberry Re Ltd. (Series 2017-1) – At a glance:

  • Issuer: Cranberry Re Ltd. (Series 2017-1)
  • Cedent / sponsor: Massachusetts Property Insurance Underwriting Association / Hannover Ruck SE
  • Placement / structuring agent/s: GC Securities is sole structuring agent and bookrunner
  • Risk modelling / calculation agents etc: AIR Worldwide
  • Risks / perils covered: Massachusetts named storm, severe thunderstorm & winter storm
  • Size: $350m
  • Trigger type: Indemnity
  • Ratings: NR
  • Date of issue: Jun 2017

Cranberry Re Ltd. (Series 2017-1) – Full details:

This is the third catastrophe bond issuance that will benefit the risk pool Massachusetts Property Insurance Underwriting Association (MPIUA) with collateralized reinsurance protection and the second issued through Cranberry Re Ltd., following on from the Cranberry Re 2015-1 transaction which matures in June 2018 and the 2010 issued Shore Re Ltd..

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.

Update 1:

The targeted size for this Cranberry Re 2017-1 cat bond has been lifted to between $250 million to $300 million.

The price guidance has been lowered and narrowed, towards the bottom of the initial range, at 2% to 2.25%.

Update 2:

We understand that this Cranberry Re 2017-1 cat bond deal is now targeting $350 million of protection for the MPIUA, while the pricing has fallen to the bottom of guidance at 2%.

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