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Mystic Re IV Ltd. (Series 2023-1)

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Mystic Re IV Ltd. (Series 2023-1) – At a glance:

  • Issuer: Mystic Re IV Ltd.
  • Cedent / sponsor: Liberty Mutual
  • Placement / structuring agent/s: GC Securities and TigerRisk Capital Markets & Advisory are joint structuring agents and bookrunners
  • Risk modelling / calculation agents etc: AIR Worldwide
  • Risks / perils covered: US, Canada, Caribbean named storm & earthquake
  • Size: $150m
  • Trigger type: Indemnity
  • Ratings: NR
  • Date of issue: Dec 2022

Mystic Re IV Ltd. (Series 2023-1) – Full details:

This is Liberty Mutual’s first catastrophe bond sponsorship of 2022, as it targets an expansion of its capital markets backed and fully collateralized multi-peril reinsurance protection.

It will be the eighth Mystic cat bond from Liberty Mutual and follows a similar format to its last deal in June 2021, which was the insurers’ first indemnity cat bond sponsorship.

Using its Bermuda-based vehicle Mystic Re IV Ltd., sources said that this transaction will see a single tranche of Series 2023-1 Class A notes being issued, to provide Liberty Mutual with at least $125 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 understand, the same set of perils and territories as the June 2021 issuance from the insurer.

The new Mystic Re IV 2023-1 cat bond will provide Liberty Mutual with protection to the end of 2025, so covering three full calendar years.

We understand that the coverage will attach at $2.6 billion of losses to Liberty Mutual, providing reinsurance across a percentage of a layer of the carriers’ tower up to exhaustion at $4.1 billion, we’re told.

As a result, this new cat bond will sit a little higher up in the reinsurance tower for Liberty Mutual than the two tranches of its June 2021 issuance.

At the base modelled case, the attachment probability for the Class A notes is said to be 2.48%, while the initial expected loss is 1.74%.

The $125 million or more in Series 2023-1 Class A notes are being offered to investors with price guidance in a range from 8.5% to 9.25%, sources said.

Which would give the notes a multiple at market of roughly 5 times the base expected loss, if they price at the mid-point of guidance.

Update 1:

Liberty Mutual is hoping to upsize its new Mystic Re 2023-1 cat bond to as much as $150 million in size.

At the same time, the Class A notes pricing has lifted to the top-end of guidance, at 9.25%, while certain terms related to the threshold factors for extension spreads were also adjusted before closing after investor feedback, we understand.

Update 2:

Liberty Mutual successfully upsized its latest catastrophe bond before closing, lifting the issuance to the elevated $150 million target level, while the pricing remained fixed at the top-end of initial guidance, to pay investors a coupon of 9.25%.

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