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Manatee Re Ltd. (Series 2015-1)

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Manatee Re Ltd. (Series 2015-1) – At a glance:

  • Issuer: Manatee Re Ltd. (Series 2015-1)
  • Cedent / sponsor: Safepoint Insurance Company
  • Placement / structuring agent/s: GC Securities is sole structuring agent and bookrunner
  • Risk modelling / calculation agents etc: AIR Worldwide
  • Risks / perils covered: U.S. named storm (Florida initially)
  • Size: $100m
  • Trigger type: Indemnity
  • Ratings: NR
  • Date of issue: Mar 2015

Manatee Re Ltd. (Series 2015-1) – Full details:

Safepoint has established an appropriately Florida themed special purpose insurer in Bermuda for the purposes of its catastrophe bond ambitions. Manatee Re Ltd. was registered in Bermuda in February for the purpose of issuing series of cat bond notes.

With this first Series 2015-1 issuance, Manatee Re Ltd. will seek to issue a single Class A tranche of notes for the purposes of collateralizing a reinsurance contract between it and Safepoint Insurance Company, Artemis understands.

The Manatee Re 2015-1 cat bond is targeting $75m of fully-collateralized reinsurance protection for the sponsor Safepoint, with the cover being for named storm risks (so tropical storms and hurricanes) initially within the state of Florida. This is the first Florida wind-only cat bond of 2015.

The protection from the Manatee Re 2015-1 cat bond will be on an indemnity trigger and per occurrence basis. The cat bond cover will have a duration of just over 2 years and 8 months, with maturity scheduled for December 2017, we understand. That means it covers three full hurricane seasons for Safepoint.

While the initial covered area is Florida only, we understand that Safepoint has baked terms into the cat bond deal that would allow it to expand it to other U.S. states after the first reset. This is a common practice for the Florida start-up insurers, many of whom have expansive strategies and plan to grow into new states as opportunities allow. Hence it makes sense to have the flexibility to expand the coverage a multi-year cat bond would provide them with.

We understand that the cat bond would attach at a level of $120m of losses to Safepoint within the covered reinsurance layer and exhaust at $320m. That equates to an attachment probability of 1.36% on a base case and an exhaustion probability of 0.68%.

That also means that should Safepoint find demand is high for its first catastrophe bond it could elect to upsize the deal significantly, to $200m, to cover that entire layer of its reinsurance programme.

The initial expected loss meanwhile is set at 0.99%. Sources said the $75m of Manatee Re 2015-1 cat bond notes are being marketed to investors with price guidance showing a coupon in the range of 4.25% to 5%.

On a multiple basis that is quite high, coming in at well over 4 times the expected loss and as much as 5 times if it priced at the upper end. Sources we discussed the issuance with suggested that this could be to give investors confidence in the start-up nature of Safepoint and its lean approach to running an insurance business (the Florida takeout insurers all tend to run a very lean ship). Another factor that could require a higher multiple is the fact that Safepoint will be looking to expand, into new lines and regions, so the covered portfolio could change we’d imagine.

The deal features a variable reset, like so many other cat bonds, allowing the protection to be adjusted within the reinsurance tower as long as the attachment probability is kept within pre-defined bounds.

Update 1:

The Manatee Re 2015-1 catastrophe bond upsized by one-third to $100m before close.

At the same time, the pricing was set at the upper end of the guidance, at 5%.

The deal features a variable reset feature, but after a reset we understand that the coupon must remain within a range of 4.75% to 5.71%.

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