Insurance carrier 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.
Liberty Mutual’s latest catastrophe bond issuance was launched to the market in late May, with a target for $240 million of indemnity reinsurance protection for hurricane and earthquake loss events.
It sees the carrier seeking indemnity trigger based reinsurance protection for a broader coverage area than its last cat bond, which featured an industry loss trigger.
Now, the target has been lifted, we understand Liberty Mutual is aiming to secure up to $300 million of coverage for losses from named storms and earthquakes affecting the US, Canada and the Caribbean.
So, Mystic Re IV Ltd. will issue two tranches of Series 2021-2 notes, to provide Liberty Mutual with between $240 million and $300 million of collateralized reinsurance protection on a per-occurrence and indemnity trigger basis, across a roughly three and a half year term, to include four US hurricane seasons.
The Class A tranche of notes will cover a percentage of losses from an attachment point of $1.5 billion to an exhaustion point of $3 billion, giving the noted an expected loss of 2.53%.
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 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, giving the notes an initial expected loss of 5.98%.
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%.
So it appears that Liberty Mutual should secure at least its targeted reinsurance from its latest cat bond, perhaps more at up to $300 million of cover, while pricing is set to fall towards the middle or lower-end of the spread guidance ranges.