The $50 million Wrigley Re Ltd. (Series 2021-1) catastrophe bond transaction, that will provide parametric earthquake insurance protection to a real estate captive insurer owned by investment giant Blackstone, has now been priced and its coupon fixed approximately 20% below the initial mid-point of price guidance.
It’s another strong example of execution, that demonstrates abundant investor demand for catastrophe bonds right now and likely represents an effective and well-priced source of parametric earthquake insurance protection for Blackstone’s captive insurer Gryphon Mutual Insurance Company.
As we first reported when this cat bond issuance launched earlier this month, Gryphon Mutual Insurance Company, Blackstone’s property insurance captive, entered the catastrophe bond market with the help of global reinsurance firm Hannover Re.
Hannover Re acts as the ceding reinsurance company, interfacing with the capital markets investors on behalf of Gryphon Mutual Insurance, which is the ceding insurer that will benefit from the reinsurance protection the notes provide, although it is Blackstone’s risk that is ultimately being ceded to capital markets through this deal.
Blackstone established Gryphon Mutual Insurance as a real estate property focused captive insurer in 2020 and said at the time the captive would give it more control over its property insurance program and help to reduce costs for the company.
By using the captive to interface with capital markets backed sources of reinsurance capacity, Blackstone will certainly achieve that goal, in adding a responsive, low-cost source of protection and capital with this parametric cat bond deal.
Now, the details are all finalised, as sources said the still $50 million offering of notes have now been priced.
So, Wrigley Re Ltd. will issue a single $50 million tranche of Series 2021-1 Class A notes, that will provide a source of fully-collateralized reinsurance protection against losses from California earthquakes on a parametric trigger and per-occurrence basis, to Gryphon Mutual, but ultimately to the benefit of Blackstone itself.
The responsive protection will run across a roughly three-year term to the end of June 2024, with coverage focused on specific calculation locations used as inputs for the earthquake parametric trigger.
The $50 million of notes that Wrigley Re Ltd. will issue have an initial expected loss of 0.99% and were first offered to cat bond investors with price guidance in a range from 2.75% to 3.25%.
As we explained earlier this week, that price guidance was reduced, with the revised coupon range falling to 2.25% to 2.75%, which would have represented a roughly 17% decline in pricing while being marketed.
But in the end, our sources said the coupon has now been fixed at 2.4%, so lower than the revised mid-point and representing a 20% drop in price from the initial guidance mid-point.
Meaning that the parametric insurance protection Blackstone and its captive insurer will now receive from their first catastrophe bond, does seem to have come in at very attractive pricing.