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Merna Re II Ltd. (Series 2022-1)

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Merna Re II Ltd. (Series 2022-1) – At a glance:

  • Issuer: Merna Re II Ltd.
  • Cedent / sponsor: State Farm
  • Placement / structuring agent/s: Unknown
  • Risk modelling / calculation agents etc: Unknown
  • Risks / perils covered: US earthquake
  • Size: $300m
  • Trigger type: Indemnity
  • Ratings: NR
  • Date of issue: Mar 2022

Merna Re II Ltd. (Series 2022-1) – Full details:

This is primary insurance giant State Farm’s first Merna Re II catastrophe bond issuance of 2022 and sees the company returning for its annual April issuance of a new Merna Re cat bond to secure additional collateralized property catastrophe reinsurance capacity from the capital markets.

The new Merna Re II 2022-1 catastrophe bond will provide State Farm with three years of additional collateralized catastrophe reinsurance protection.

The perils will be US focused and we would imagine this is an earthquake cat bond, given State Farm’s habit of sponsoring a late March deal each year covering that type of risk.

But, for this new $300 million Merna Re II Ltd. 2022-1 cat bond, we’re going to categorise it as US property catastrophe risks in our charts and data, which we will update should greater clarity on the covered perils become available later.

As with every Merna Re cat bond sponsored by State Farm since 2016, the issuance was relatively privately marketed and placed with a select group or club of initial investors.

Now, the resulting $300 million of notes will be more broadly available on the cat bond secondary market.

So, State Farm continues to source collateralized reinsurance capacity from insurance-linked securities (ILS) funds and investors on a privately marketed and placed basis.

Merna Re II Ltd., a Bermuda domiciled special purpose insurer, has issued and sold $300 million of Series 2022-1 Class A notes to cat bond funds and ILS investors, with the proceeds used to collateralize an underlying reinsurance agreement between the issuer and the sponsor State Farm.

The notes will provide State Farm with property catastrophe reinsurance (possibly US quake focused) on an indemnity trigger and we expect per-occurrence basis, with the protection running across a three-year term to early April 2025.

We understand this Merna Re II 2022-1 cat bond provides State Farm with reinsurance against earthquake losses across the United States, excluding California, Florida and Texas.

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