Matterhorn Re Ltd. (Series 2022-2)

This is global reinsurance firm Swiss Re’s tenth takedown under the Matterhorn Re catastrophe bond program, its third of 2022 if you include the privately placed slice of the reinsurers’ stop-loss deal that was issued using the vehicle, or alternatively its second full 144a and more broadly marketed catastrophe bond of 2022.

With its latest Matterhorn Re catastrophe bond, Swiss Re is looking to secure per-occurrence based retrocessional reinsurance protection against certain losses from US named storms, so tropical storms and hurricanes, on an industry loss trigger basis.

The hurricane coverage will span the entire hurricane exposed coastline of the United States, so from the Gulf Coast, including Florida, up the eastern seaboard and also islands such as Puerto Rico.

Matterhorn Re Ltd., Swiss Re’s Bermuda based special purpose insurer, is seeking to issue $150 million or more of notes across a proposed three tranches of the Series 2022-2 cat bond, which will be sold to investors and the proceeds used to collateralise retrocessional reinsurance agreements between the SPI and sponsor Swiss Re.

Whether all three tranches get issued remains to be seen, as we’re told the risk levels are similar, although the structures different, perhaps suggesting the tranches with the best response from investors are the ones that will ultimately get placed.

All three tranches would provide the same per-occurrence and industry-loss trigger based retrocessional reinsurance protection against US named storm losses to Swiss Re.

We’re told none of the three tranches are sized, while one is zero-coupon structured and only has a short tenure, another having a coupon but being short tenure as well, and the other a multi-year tranche.

All three tranches of cat bond notes have the same expected loss of 3.31% at the base case and an attachment probability of 3.82%, we’re told.

The Class A tranche are zero coupon discount notes, which are priced at 90% to 90.5% of par, we understand, implying a rough coupon-equivalent of 9.5% to 10% and these have a term to December 2022, so only covering the coming hurricane season.

The Class B tranche are priced with a coupon of between 19% to 20.5%, we’re told, and also only have a term for one wind season to December 2022.

The final Class C tranche of notes are multi-year and priced with guidance of 9.5% to 10.25%, but their term would be until June 2024, so covering two wind seasons for Swiss Re if placed.

Update 1:

We’re told the Class B single wind season coupon notes will no longer be issued, as Swiss Re proceeds with the Class A and C layers of this new Matterhorn Re cat bond deal.

The pricing has tightened for both of the remaining tranches though, with the Class A zero-coupon notes now priced at 90.25% to 90.75%, so slightly tighter and implying a rough coupon-equivalent of 9.25% to 9.75%, while the Class C two-wind season term coupon notes are being offered with updated and tighter price guidance of between 9.5% and 10%.

Update 2:

The Class A zero-coupon notes tranche was finalised at $125 million in size and with a price of 91%, so a rough coupon-equivalent of 9% (remembering these only have a 6 month term) and below the bottom-end of initial guidance.

The Class C, multi-year and bulleted notes, were finalised at $75 million in size, with a coupon of 9% to be paid to investors, which is below the lowest-end of initial pricing.