Andover Companies seeks Locke Tavern Re cat bond renewal at slightly larger $200m

The Andover Companies has returned to the catastrophe bond market for its second sponsorship, looking to secure $200 million or more in collateralized catastrophe reinsurance from a Locke Tavern Re Ltd. (Series 2026-1) issuance that will renew and expand the cat bond protection from its soon to mature first issuance, Artemis can report.

The Andover Companies is one of the largest and longest-standing mutual insurance groups in the Northeast US and it sponsored its debut catastrophe bond back in March 2023.

That deal secured the company $175 million of multi-peril catastrophe reinsurance protection from the capital markets, to protect its main underwriting entities.

With that first Locke Tavern Re cat bond scheduled to mature at the beginning of April 2026, it is encouraging to now learn that The Andover Companies wants to sponsor a renewal of sorts.

For its second cat bond under the Locke Tavern Re Ltd. special purpose insurance vehicle based in Bermuda, Andover Companies is seeking slightly more in protection, with an initial issuance target size for $200 million of Series 2026-1 notes.

It’s also notable that this 2026-1 issuance will feature two classes of notes, compared to the one from the 2023-1 issuance, which shows the sponsor becoming more sophisticated in how it thinks about layering the benefits of this capital markets backed catastrophe reinsurance protection within its tower.

We’re told that Locke Tavern Re Ltd. is offering two tranches of Series 2026-1 notes, that will be sold to cat bond investors and the proceeds used to collateralize a reinsurance agreement between the issuer and The Andover Companies’ insurers.

As with the first Locke Tavern Re cat bond, the covered insurers are again named as Merrimack Insurance Company, Cambridge Insurance Company, and Bay State Insurance Company, we understand, while additional subsidiaries could be covered by the notes in future.

The issuance is targeted at $200 million in size initially, sources said, and again the target is to secure fully-collateralized multi-peril US northeast catastrophe reinsurance, on an indemnity trigger and per-occurrence basis, across a three-year term to the end of March 2029.

We understand that the covered perils are the same as the first cat bond from the Andover Companies, being Northeast US named storm, severe thunderstorm, winter storm and earthquake risks, while the covered area will again span the states of Connecticut, Illinois, Maine, Massachusetts, New Hampshire, New Jersey, New York and Rhode Island.

A $100 million tranche of Series 2026-1 Class A notes would attach their coverage at $1.1 billion of losses, exhausting at $1.55 billion, we are told. This is the same layer in which the $175 million Series 2023-1 cat bond featured.

That gives the Class A notes an initial attachment probability of 1.582%, an initial base expected loss of 1.302% and they are being offered with price guidance in a range from 3.25% to 3.75%, we understand.

An also $100 million tranche of Series 2026-1 Class B notes would attach their coverage lower down at $700 million of losses, exhausting at $1.1billion, so sitting in a layer beneath the Class A’s.

Which gives the Class B notes an initial attachment probability of 2.481%, an initial base expected loss of 1.96% and they are being offered with price guidance in a range from 4.25% to 4.75%, sources explained.

Comparing to the soon to mature Locke Tavern Re 2023-1 cat bond notes, which remember were issued at a time when the price environment in reinsurance was harder, those came with an initial expected loss of almost 0.92% and priced to pay investors a spread of 4.75%, so a significantly higher multiple than is indicated with either of these renewal tranches.

As a result, it will be interesting to see whether The Andover Companies might look to upsize on the initial target, to lock-in more multi-year reinsurance at the currently attractive spread levels.

You can read all about this new Locke Tavern Re Ltd. (Series 2026-1) catastrophe bond, as well as details on over 1,000 other cat bond transactions in the extensive Artemis Deal Directory.