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Liberty Mutual returns for $240m Mystic Re IV indemnity cat bond


Insurance giant Liberty Mutual has returned to the catastrophe bond market for the second time in just six months, quickly coming back with a $240 million Mystic Re IV Ltd. (Series 2021-2) transaction, which sees the carrier looking for indemnity reinsurance cover for hurricane and earthquake loss events.

liberty-mutual-logoLiberty Mutual had sponsored a $300 million Mystic Re IV Ltd. (Series 2021-1) catastrophe bond last December, which was the carriers first visit to the cat bond market since 2012.

That transaction featured an industry loss trigger, so was presumably providing cover for the Liberty Mutual Re reinsurance book, especially as sources had told us the company had written some retro last year.

But for the second cat bond from Liberty Mutual in just six months, the company is seeking indemnity based protection and for a broader coverage area, our sources said.

Mystic Re IV Ltd. will seek to issue two tranches of Series 2021-2 notes, that will provide Liberty Mutual with at least $240 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’re told, so a broader covered area than its last cat bond deal.

The new cat bond will provide Liberty Mutual with protection to the end of 2024, so covering three and a half years, but including four US hurricane seasons.

A $180 million tranche of Class A notes are the less risky layer, that will provide Liberty Mutual with reinsurance to cover a percentage of losses from an attachment point of $1.5 billion to an exhaustion point of $3 billion.

That gives the $180 million of Class A notes an expected loss of 2.53% and the notes are being offered to investors with price guidance in a range from 5.25% to 6%.

A $60 million 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.

This tranche of notes will have an initial expected loss of 5.98% and are being marketed with price guidance in a range from 11.25% to 12%, we’re told.

It’s encouraging to see Liberty Mutual back so soon with another catastrophe bond, after its eight year break from the market.

The deal has plenty of room to upsize, should cat bond investor appetite support it and seeing the indemnity trigger in use is encouraging as it shows Liberty Mutual looking to use cat bonds to provide reinsurance to more of its underwriting book.

You can read all about this Mystic Re IV Ltd. (Series 2021-2) catastrophe bond from Liberty Mutual and every other cat bond issued in the Artemis Deal Directory.

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