Manatee Re III Pte. Ltd. (Series 2019-1)

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Manatee Re III Pte. Ltd. (Series 2019-1) – At a glance:

  • Issuer: Manatee Re III Pte. Ltd.
  • 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, New Jersey & Texas initially)
  • Size: $40m
  • Trigger type: Indemnity
  • Ratings: NR
  • Date of issue: May 2019

Manatee Re III Pte. Ltd. (Series 2019-1) – Full details:

Safepoint Insurance Company has returned for its fourth catastrophe bond issuance and this time the insurer has elected to domicile the issuance vehicle in Singapore, to take advantage of the new regulation and available grant funding.

Manatee Re III Pte. Ltd. has been established as a special purpose reinsurance vehicle registered in Singapore and will seek to issue a single tranche of Series 2019-1 cat bond notes, that will be sold to investors to provide Safepoint with a source of collateralised reinsurance capacity.

The SPRV will seek to issue a single tranche of Series 2019-1 cat bond notes, that will be sold to investors to provide Safepoint with a source of collateralised reinsurance capacity.

We’re told the Manatee Re III cat bond issuance is targeting at least $75 million of reinsurance protection for sponsor Safepoint, with two tranches of notes set to be sold to provide the collateral to underpin the reinsurance contracts.

The Manatee Re III Pte. 2019 cat bond will provide sponsor Safepoint with a source of indemnity based reinsurance across a three-year term, providing cascading and per-occurrence coverage against losses from named storms and severe thunderstorms in Florida, Louisiana, New Jersey & Texas.

We’re told the cat bond coverage area could be expanded, should Safepoint grow into further U.S. states during the period of coverage, so providing flexible reinsurance that can support the companies ongoing expansion and growth.

Manatee Re III Pte. Ltd. is going to issue two tranches of notes, both of which are exposed to the perils above but at different risk levels.

A currently $50 million tranche of Series 2019-1 Class A notes will have an initial attachment point of $27 million and cover a layer right up to $377 million, we understand, with an initial expected loss of 1.15%. This tranche is to be offered to investors with pricing guidance of 4.5% to 5%.

A $25 million tranche of Series 2019-1 Class B notes will have an initial attachment also at $27 million, covering a layer up to $107 million, with an initial expected loss of 4.23%, so sitting below the Class A notes and being more risky as a result. This tranche has price guidance of 8.75% to 9.25%, we’re told.

We understand that Safepoint will seek as much capital markets reinsurance protection as it can secure with this new cat bond, filling the rest of these layers with other traditional or collateralised sources of reinsurance as is necessary following the execution of this transaction.

Each tranche will sit alongside Safepoint’s 2018 Manatee Re II Ltd. catastrophe bond.

Update 1:

The Manatee Re III Pte. Ltd. (Series 2019-1) transaction which is being issued out of Singapore, looks set for pricing above the initial guidance range, as investors demand more return for the risk they are taking on.

The first tranche of Series 2019-1 Class A notes had been targeting $50 million, but this we’re now told is targeting a $20 million to $40 million tranche of notes.

The Class A notes have an initial expected loss of 1.15% and were at first offered to investors with pricing guidance of 4.5% to 5%, but we’re now told the guidance has risen to 5.25%, so above the initial range.

The second tranche of Series 2019-1 Class B notes began targeting $25 million of reinsurance coverage for Safepoint and we’re told are still aiming for that, with a proposed $20 million to $30 million sizing.

With an initial expected loss of 4.23%, the Class B tranche notes will sit below the Class A notes, being more risky as a result. This layer was initially offered to investors with price guidance of 8.75% to 9.25%, but we’re now told the coupon has risen to above that range at 9.5%.

The increase in pricing is a sign of reinsurance market conditions for the Florida region at these renewals, after excessive losses and loss adjustment expenses totaled many insurers protection in the prior years.

Update 2:

At pricing the size of the Manatee Re III catastrophe bond shrank, achieving just $40 million of the reinsurance coverage that sponsor Safepoint had been seeking.

The final pricing was at the elevated above guidance levels of 5.25% for the now $20 million of Class A notes and 9.5% for the $20 million of Class B notes.

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