Mystic Re IV Ltd. (Series 2026-1)

Liberty Mutual Insurance has returned to the catastrophe bond market to sponsor a Mystic Re IV Ltd. (Series 2026-1) issuance that will become the eleventh in the Mystic Re series of cat bonds from the company.

In recent years the insurer has come to market in December to sponsor a new cat bond, layering reinsurance from the capital markets through its tower.

With this Series 2026-1 issuance from special purpose insurer (SPI) Mystic Re IV Ltd., Liberty Mutual is seeking indemnity based reinsurance over a multi-year term, through a three tranche issuance covering North American and Caribbean perils.

For this cat bond that will be issued in 2025, but will come on-risk from 2026, Liberty Mutual is once again utilising its Bermuda-based special purpose insurer (SPI) Mystic Re IV Ltd.

Three tranches of Series 2026-1 notes are being offered to cat bond investors, with the issuance designed to provide Liberty Mutual at least $125 million in multi-peril, multi-year collateralized reinsurance protection on a per-occurrence basis.

The notes will provide reinsurance protection to Liberty Mutual and its affiliates across a three calendar year term, from January 1st 2026 to the end of 2028, we are told.

The Mystic Re IV 2026-1 cat bond notes will provide Liberty Mutual with reinsurance protection against losses from named storms, earthquakes, severe weather and wildfires on an indemnity trigger and per-occurrence basis from all three tranches, with the covered area being the US, Canada and the Caribbean.

A currently $40 million tranche of Class A notes will attach their coverage at $3 billion of losses and exhausting at $3.75 billion, which gives them an initial attachment probability of 1.79%, an initial expected loss of 1.42%, and we’re told these notes are offered with spread price guidance in a range from 3.25% to 3.75%.

A currently $60 million Class B tranche will attach lower down at $1.5 billion of losses and exhausting at $3 billion, which gives them an initial attachment probability of 7.17%, an initial expected loss of 3.62%, and we’re told these notes are offered with spread price guidance in a range from 6.75% to 7.25%.

The final currently $25 million Class C tranche will attach their coverage lower down still at $1 billion of losses and exhaust at $1.5 billion, which gives them an initial attachment probability of 16.86%, an initial expected loss of 11.19%. However, we’re told these notes are not currently offered with any price guidance, so it’s likely feedback is being sought from investors first.

The Class C tranche are one of the riskiest ever to come from the Mystic Re program, we understand. While the price guidance for the other two tranches is lower than comparable recent issuances, reflecting the tighter spread environment in the catastrophe bond market.

Update 1:

The riskiest Class C tranche of notes will not now be issued. The remaining deal has adjusted in size, to now being targeted at between $120 million and $150 million, while the price guidance has been adjusted.

The Class A notes are now between $40 million and $50 million in size, while the price guidance has been fixed at 3.25%, so the low-end of the initial range.

The Class B notes are now between $80 million and $100 million in size, while their price guidance has been fixed at 6.9%, so within the bottom half of the initial range.

Update 2:

We understand that Liberty Mutual eventually priced its new Mystic Re IV Series 2026-1 catastrophe bond to provide it with $150 million of reinsurance limit.

The Class A notes were upsized to $50 million in size, while they priced to pay investors an initial risk interest spread of 3.25%, so the low-end of the guidance range.

The Class B notes were upsized to $100 million in size, while their pricing was finalised for a risk interest spread of 6.9%, so within the bottom half of the initial guidance range.