Swiss Re Insurance-Linked Fund Management

PCS - Emerging Risks, New Opportunities

Mystic Re IV Ltd. (Series 2021-1)

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Mystic Re IV Ltd. (Series 2021-1) – At a glance:

  • Issuer: Mystic Re IV Ltd.
  • Cedent / sponsor: Liberty Mutual
  • 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, U.S. earthquake
  • Size: $300m
  • Trigger type: Industry loss index
  • Ratings: NR
  • Date of issue: Dec 2020

Mystic Re IV Ltd. (Series 2021-1) – Full details:

This is the first catastrophe bond to be sponsored by U.S. primary carrier Liberty Mutual in eight years.

Liberty Mutual is seeking a three year source of U.S. multi-peril reinsurance coverage from its return to the catastrophe bond market in late 2020.

Mystic Re IV Ltd., a newly registered Bermuda domiciled special purpose insurer (SPI), will issue one tranche of notes that will be sold to cat bond investors and the proceeds used to collateralized underlying reinsurance agreements between Mystic Re IV and Liberty Mutual Insurance.

The reinsurance protection will cover Liberty Mutual against certain losses from U.S. named storms and U.S. & Canada earthquakes, with the covered area including Puerto Rico, DC and the U.S. Virgin Islands, on a per-occurrence basis and using an industry loss trigger.

We understand the transaction will come on-risk from January 1st 2021 and run to the end of 2023.

Mystic Re IV Ltd. is set to issue a targeted $200 million tranche of Series 2020-1 Class A notes, with the notes having an initial expected loss of 4.55% and being offered to cat bond funds and investors with coupon price guidance in a range from 9.25% to 10%, our sources said.

Update 1:

This cat bond issuance launched with a target of providing $200 million of protection to Liberty Mutual, but we’re now told this has increased by 50% to become a $300 million issue.

At the same time, price guidance has now narrowed and fallen, with an amended range of 9% to 9.25% now offered.

Update 2:

The upsized target size of $300 million was achieved for this cat bond from Liberty Mutual.

At the same time, the notes eventually priced at the bottom end of the reduced guidance, offering investors a coupon of 9%.

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