Swiss Re Insurance-Linked Fund Management

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Long Point Re III Ltd. (Series 2012-1)

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Long Point Re III Ltd. (Series 2012-1) – At a glance:

  • Issuer: Long Point Re III Ltd. (Series 2012-1)
  • Cedent / sponsor: Travelers
  • Placement / structuring agent/s: GC Securities are lead structurer and also joint bookrunner alongside Swiss Re Capital Markets. BNP Paribas and Aon Benfield Securities are co-managers.
  • Risk modelling / calculation agents etc: AIR Worldwide
  • Risks / perils covered: U.S. hurricane (Northeastern U.S. states only)
  • Size: $250m
  • Trigger type: Indemnity
  • Ratings: S&P: 'BB+'
  • Date of issue: Jun 2012
  • Date of maturity (dd/mm/yyyy): 12/06/2015
  • Coupon / pricing yield Class A: 6.00%
  • news coverage: Articles discussing Long Point Re III Ltd. (Series 2012-1) from

Long Point Re III Ltd. (Series 2012-1) – Full details:

This is Travelers third cat bond all of which have used the Longpoint Re naming convention.

Long Point Re III Ltd. is a newly established Cayman Islands SPV and shelf program set up for the purpose of issuing series of catastrophe bond notes to provide protection to Travelers and their subsidiaries.

This Series 2012-1 issuance will see Long Point Re III seek to issue a single tranche of Class A notes, currently sized at $150m, to provide three years of protection to Travelers subsidiaries on a per-occurrence basis using an indemnity trigger for certain northeastern U.S. hurricane risks. The actual beneficiaries of the deal include the Travelers Indemnity Co., Travelers Casualty and Surety Co., St. Paul Fire and Marine Insurance Co., and The Standard Fire Insurance Co., together with their direct and indirect insurance subsidiaries.

The Class A notes will cover a percentage of losses between an attachment point of $2 billion and an exhaustion point of $2.5 billion of the ultimate net losses of Travelers in the covered region on a per-occurrence basis. Interestingly, there is a limit set for the maximum loss per risk, or building covered under the transaction, of $20m.

Long Point Re III covers a majority subset of Travelers overall personal and commercial lines portfolio of business. The commercial lines business is a mix of Travelers’s select accounts (small business policies) and commercial accounts according to S&P. Certain business units that cover large and unique exposures, complex financial structures, and mobile property have been excluded from the subject business.

The covered area for Long Point Re III is the northeastern U.S. coastal states of Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, Vermont, Virginia, and the District of Columbia.

AIR Worldwide are providing risk modelling services for the deal. In their historical modelling work they identified one historical event, the 1938 Northeast Clipper hurricane which impacted New York, which would have caused a total loss to the notes with losses of $2.711 billion. No other historical events would even have hit the attachment point.

The probability of attachment for the notes is 0.89% with an expected loss of 0.81%, while the probability of exhaustion is 0.71%. Those are pretty low figures in the world of cat bonds so it’s expected that this deal will pay a relatively low coupon compared to other U.S. hurricane cat bonds, however the diversification it offers should still make it very attractive to investors looking for safer returns.

Proceeds from the sale of the Long Point Re III notes will be deposited in a reinsurance trust account and invested into U.S. Treasury money market funds. The notes will pay a coupon somewhere in the range of 6.25% to 7% we are told.

Update: This cat bond increased in size before close to $250m due to investor demand. The pricing guidance was lowered to between 6% and 6.25%.

The transaction eventually priced at the lower end of that range at 6% on the 30th May.

The deal completed successfully on the 6th June when Standard & Poor’s affirmed its ratings at ‘BB+’.

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