Mystic Re IV Ltd. (Series 2021-2)

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Mystic Re IV Ltd. (Series 2021-2) – 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: US, Canada, Caribbean named storm & earthquake
  • Size: $300m
  • Trigger type: Indemnity
  • Ratings: NR
  • Date of issue: Jun 2021

Mystic Re IV Ltd. (Series 2021-2) – Full details:

This is Liberty Mutual’s second catastrophe bond within six months after an eight year hiatus from the market, but its also the carriers first indemnity triggered cat bond since that break, with its other recent issue last December having been industry loss trigger based.

Mystic Re IV Ltd. will seek to issue two tranches of Series 2021-2 notes, that will provide Liberty Mutual with at least $240 million of collateralized reinsurance protection on a per-occurrence and indemnity trigger basis.

The coverage will be for losses from named storms and earthquakes affecting the US, Canada and the Caribbean we’re told, so a broader covered area than its last cat bond deal.

The new cat bond will provide Liberty Mutual with protection to the end of 2024, so covering three and a half years, but including four US hurricane seasons.

A $180 million tranche of Class A notes are the less risky layer, that will provide Liberty Mutual with reinsurance to cover a percentage of losses from an attachment point of $1.5 billion to an exhaustion point of $3 billion.

That gives the $180 million of Class A notes an expected loss of 2.53% and the notes are being offered to investors with price guidance in a range from 5.25% to 6%.

A $60 million riskier Class B tranche of notes will cover losses from an attachment of $1 billion to $1.5 billion, so sitting beneath the Class A layer in the reinsurance tower.

This tranche of notes will have an initial expected loss of 5.98% and are being marketed with price guidance in a range from 11.25% to 12%, we’re told.

Update 1:

Liberty Mutual Insurance has lifted its target for its new Mystic Re IV Ltd. (Series 2021-2) catastrophe bond transaction to up to $300 million of collateralized reinsurance protection.

The Class A tranche is now targeting between $180 million and $225 million of protection. They were first offered to investors with price guidance in a range from 5.25% to 6%, but we’re now told the range has been narrowed towards the mid-point at between 5.5% and 5.75%.

The Class B tranche is now targeting from $60 million to $75 million of protection for Liberty Mutual. They were first marketed with price guidance in a range from 11.25% to 12%, but this has now also narrowed and has fallen to below the initial range at 10.75% to 11.25%.

Update 2:

This cat bond upsized to the higher target of $300 million, while pricing fell below the initial mid-point for both tranches of notes.

The Class A notes settled at $225m and having been first offered to investors with price guidance in a range from 5.25% to 6%, that range was narrowed to between 5.5% and 5.75% and we’re told the price has now been finalised at 5.5%, so a roughly 2% drop in price from the initial mid-point.

The Class B tranche will now offer $75 million of protection to Liberty Mutual. These notes were first offered with price guidance in a range from 11.25% to 12%, a range which was narrowed and fell to below the initial at 10.75% to 11.25% and we’re now told pricing has been finalised for this tranche at the low-end of 10.75%, representing a roughly 8% drop in price.

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