Swiss Re Insurance-Linked Fund Management

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Long Point Re IV Ltd. (Series 2022-1)

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Long Point Re IV Ltd. (Series 2022-1) – At a glance:

  • Issuer: Long Point Re IV Ltd.
  • Cedent / sponsor: Travelers
  • Placement / structuring agent/s: Swiss Re Capital Markets is sole structuring agent and joint bookrunner. Aon Securities is joint bookrunner.
  • Risk modelling / calculation agents etc: AIR Worldwide
  • Risks / perils covered: U.S. tropical cyclone, earthquake, severe thunderstorm, winter storm (Northeastern U.S. states only)
  • Size: $575m
  • Trigger type: Indemnity
  • Ratings: Fitch: BB-sf
  • Date of issue: May 2022

Long Point Re IV Ltd. (Series 2022-1) – Full details:

This is the seventh Long Point Re catastrophe bond to be sponsored by US primary insurance giant Travelers.

Travelers first entered the catastrophe bond market in 2007 and with its seventh issuance it is seeking a renewal of some or all of its last cat bond, the $500 million Long Point Re III Ltd. (Series 2018-1) transaction that matures in June 2022.

For 2022, Travelers has established a new Bermuda domiciled company, that is expected to become a special purpose insurer (SPI), named Long Point Re IV Ltd.

Long Point Re IV Ltd. will seek to issue a single tranche of Series 2022-1 Class A notes that will be sold to investors and the proceeds used to collateralize a reinsurance agreement between the SPI and Travelers.

The reinsurance arrangement will cover Travelers against the same perils as its 2018 cat bond, so U.S. tropical cyclone, earthquake, severe thunderstorm, and winter storm events, across Northeastern U.S. states only.

The covered area is the states of Connecticut, Delaware, District of Columbia, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, Virginia and Vermont.

The Long Point Re IV 2022-1 cat bond will provide reinsurance to Travelers and subsidiaries that include the usual insurance companies, Travelers Indemnity, Travelers Casualty & Surety, St. Paul Fire and Marine and The Standard Fire Insurance Company, as well as any associated subsidiaries of each.

The Long Point Re IV 2022-1 cat bond notes will provide Travelers with this reinsurance across a four year term, with maturity slated for June 1st 2026, on an indemnity trigger and per-occurrence basis, we’re told.

Long Point Re IV will seek to issue at least $300 million of Class A notes, we understand, so at least partially replacing the maturing 2018 cat bond, but we hear a full-replacement would be desirable for the insurer, if market conditions allow.

The $300 million or more of Class A notes would attach at $2.2 billion of losses and exhaust coverage at $2.9 billion, giving them an initial attachment probability of 1.348%, and initial expected loss of 1.127%.

We’re told the notes are being offered to cat bond investors with price guidance in a range from 3.75% to 4.25%.

Update 1:

The target size for this new cat bond issuance for Travelers has almost doubled, to between $500 million and $600 million.

At the same time, the coupon has now been fixed at the top-end of guidance, at 4.25%.

Update 2:

The cat bond eventually priced to provide Travelers $575 million of reinsurance protection, with the coupon fixed at the top-end of guidance 4.25%.

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