Swiss Re Insurance-Linked Fund Management

PCS - Emerging Risks, New Opportunities

Manatee Re II Ltd. (Series 2018-1)

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Manatee Re II Ltd. (Series 2018-1) – At a glance:

  • Issuer: Manatee Re II Ltd. (Series 2018-1)
  • Cedent / sponsor: Safepoint Insurance Company
  • Placement / structuring agent/s: GC Securities is sole structuring agent and joint bookrunner. Swiss Re Capital Markets is joint bookrunner.
  • Risk modelling / calculation agents etc: AIR Worldwide
  • Risks / perils covered: U.S. named storm, U.S. severe thunderstorm (Florida, Louisiana & Texas initially)
  • Size: $200m
  • Trigger type: Indemnity
  • Ratings: NR
  • Date of issue: Apr 2018

Manatee Re II Ltd. (Series 2018-1) – Full details:

Safepoint returns for its third catastrophe bond issuance through a newly established special purpose insurer, Manatee Re II Ltd., as it seeks to expand its capital markets backed reinsurance protection.

For its third cat bond Safepoint is expanding the capital markets backed reinsurance protection it receives, adding a new peril, a new state that coverage will be active in and also registering a new Bermuda domiciled special purpose insurer (SPI), Manatee Re II Ltd. for the offering, we understand.

The Manatee Re II cat bond sees Safepoint looking to secure a three-year source of fully-collateralized reinsurance protection for the perils of U.S. named storms and U.S. severe thunderstorms. The coverage will be for the states of Florida, Louisiana and Texas initially, with the ability to expand at annual resets if the sponsor chooses, we’re told.

Manatee Re II Ltd. will seek to issue two tranches of notes, currently targeting a $165 million issuance, which will be sold to qualified investors to collateralize the necessary reinsurance agreements with the insurer.

The coverage from this cat bond is on an indemnity trigger basis and designed as a cascading and per-occurrence structure the coverage will drop down as underlying stated reinsurance layers are eroded by loss events.

A currently $125 million Class A tranche of notes is the less risky of the two, with an initial attachment probability of 2.22% and an expected loss of 1.08%. This layer sits higher up in Safepoint’s reinsurance tower, above its FHCF and much of its other reinsurance coverage. We’re told this tranche will be offered to investors with coupon price guidance of 4.25% to 4.75%.

The second tranche, a currently $40 million layer of Class B notes, have an initial attachment probability of 6.99% and expected loss of 4.07%. Again, this tranche sits above the FHCF coverage Safepoint has, we’re told. These notes are set to be offered to cat bond investors with price guidance of 7.75% to 8.5%, we understand.

Both tranches of Series 2018-1 notes have room for growth if investor appetite allows, as they cover layers of risk larger than their current size in the Safepoint reinsurance tower, sources said.

Update 1:

The Manatee Re II 2018-1 cat bond from Safepoint increased in size while marketing by 21% to reach $200 million, while at the same time the pricing on both tranches of notes was fixed at the lowest end of initial guidance.

The first tranche of notes began as a $125 million Class A layer of notes, the less risky of the two. This tranche, which has an expected loss of 1.08%, has been increased in size to $160 million, we’re told. At the same time the pricing of this tranche of notes dropped to the bottom of the initial coupon price guidance of 4.25% to 4.75%, being fixed now at 4.25%.

The second and riskier tranche began as a $40 million layer of Class B notes, with an expected loss of 4.07%, and the size of this layer has not changed. However investors demonstrated their appetite still, with the initial price guidance of 7.75% to 8.5% falling to the bottom end of guidance and the coupon now fixed at the lowest end at 7.75%.

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