Locke Tavern Re Ltd. (Series 2026-1)

This is the second catastrophe bond sponsorship from one of the largest and longest-standing mutual insurance groups in the Northeast, The Andover Companies.

Sponsor The Andover Companies first came to the cat bond market in March 2023, but that three-year deal will soon mature.

As a result, The Andover Companies is looking to renew a collateralized source of multi-peril catastrophe reinsurance from the capital markets, again using its Bermuda based vehicle named Locke Tavern Re Ltd., to issue a series 2026-1 pair of catastrophe bond note tranches.

We’re told that Locke Tavern Re Ltd. is offering two tranches of Series 2026-1 notes, that will be sold to cat bond investors and the proceeds used to collateralize a reinsurance agreement between the issuer and The Andover Companies’ insurers.

As with the first Locke Tavern Re cat bond, the covered insurers are again named as Merrimack Insurance Company, Cambridge Insurance Company, and Bay State Insurance Company, we understand, while additional subsidiaries could be covered by the notes in future.

The issuance is targeted at $200 million in size initially, sources said, and again the target is to secure fully-collateralized multi-peril US northeast catastrophe reinsurance, on an indemnity trigger and per-occurrence basis, across a three-year term to the end of March 2029.

We understand that the covered perils are the same as the first cat bond from the Andover Companies, being Northeast US named storm, severe thunderstorm, winter storm and earthquake risks, while the covered area will again span the states of Connecticut, Illinois, Maine, Massachusetts, New Hampshire, New Jersey, New York and Rhode Island.

A $100 million tranche of Series 2026-1 Class A notes would attach their coverage at $1.1 billion of losses, exhausting at $1.55 billion, we are told. This is the same layer in which the $175 million Series 2023-1 cat bond featured.

That gives the Class A notes an initial attachment probability of 1.582%, an initial base expected loss of 1.302% and they are being offered with price guidance in a range from 3.25% to 3.75%, we understand.

An also $100 million tranche of Series 2026-1 Class B notes would attach their coverage lower down at $700 million of losses, exhausting at $1.1billion, so sitting in a layer beneath the Class A’s.

Which gives the Class B notes an initial attachment probability of 2.481%, an initial base expected loss of 1.96% and they are being offered with price guidance in a range from 4.25% to 4.75%, sources explained.

Update 1:

The Andover Companies target for its new Locke Tavern Re Series 2026-1 catastrophe bond has been increased, with now between $250 million and as much as $300 million of reinsurance capital now sought.

The Class A notes are now targeted at between $125 million and $150 million, while their pricing has been updated at the low-end of 3.25%.

The Class B notes are also now targeted at between $125 million and $150 million, while their pricing has also been updated at the low-end of 4.25%.

Update 2:

The Andover Companies secured $250 million of reinsurance capital from its second catastrophe bond sponsorship, more than replacing a $175 million maturing 2023 deal.

The Class A notes were finalised at $125 million and priced to pay investors a spread at the low-end of 3.25%.

The Class B notes were also finalised at $125 million and similarly priced to pay investors a spread at the low-end of 4.25%.