Marlon Ltd. (Series 2024-1)

This Marlon Ltd. Series 2024-1 catastrophe bond issuance will benefit an affiliate of private equity and financial services focused investment firm Gallatin Point Capital LLC.

With its first cat bond, Gallatin Point Capital LLC is looking to build relationships with insurance-linked securities (ILS) investors and to secure a capital markets backed source of reinsurance protection to offset some of the Florida named storm and hurricane exposure in its portfolio of re/insurance sector investments.

Sources have told us that Gallatin Point has established a Bermuda company named Marlon Ltd. to issue its catastrophe bonds.

Marlon Ltd. will issue two tranches of Series 2024-1 notes, both of which will be sold to investors and the proceeds will collateralize reinsurance agreements to provide Florida named storm reinsurance back to a Gallatin Point investment affiliate named GPC Partners Investments Corp (Coppola) LP.

Two tranches of notes are being issued, that will together provide a targeted $150 million of protection to Gallatin Point across a three year term to the start of June 2027, we understand.

A $100 million Class A tranche of notes will provide per-occurrence coverage, on an industry loss index trigger basis.

The Class A notes would attach at 3.8bn index points and exhaust at 4.4bn points, giving them an initial attachment probability of 0.75%, an initial expected loss of 0.65% and they are being offered to investors with price guidance of 5.25% to 6%, we are told.

A $50 million Class B tranche of notes are set to provide both per-occurrence and also multi-event capped aggregate cover as well, in an interesting structure.

The Class B notes will therefore have two index attachment points, the per-occurrence coverage being the exact same layer as the Class A notes, but the aggregate cover will have an event deductible of 30m index points, but with each capped at 435m points per event, attaching at 870m points and exhausting at 1.3bn, we understand.

As a result, the Class B notes have an initial attachment probability of 1.43%, an initial expected loss of 0.92% and are being offered to investors with price guidance in a range from 9.75 to 10.5%.

We are also told that there are optional redemptions after the first two risk periods, with an 8.5% premium payable at July 2025 and a 5.5% premium at July 2026, which would give Gallatin Point an option to cancel the coverage, while compensating investors better than many other cat bonds we’ve seen with similar terms.

Update 1:

The size target for this debut Marlon Ltd. catastrophe bond from Gallatin Point has not changed from the initial $150m, but the price guidance has been lifted, we understand.

The $100m Class A notes are now being offered with pricing of 7%, and the $50m Class B notes with pricing of 11%, so both spreads now elevated above their initial guidance ranges.

Update 2:

Nothing changed as final pricing was decided for the Marlon Ltd. catastrophe bond for Gallatin Point, with the $100m Class A notes set to price at 7%, and the $50m Class B notes at 11%.