US insurer Liberty Mutual has now secured its new Mystic Re IV Ltd. (Series 2021-2) catastrophe bond transaction at its 25% upsized target to provide $300 million of multi-year collateralized reinsurance protection.
Liberty Mutual’s latest catastrophe bond was launched to the market in late May, with a target of securing $240 million of indemnity reinsurance protection against losses from hurricane and earthquake loss events.
The carrier is seeking indemnity trigger based reinsurance protection for a broader coverage area than its last cat bond with this new deal, as its last issuance featured an industry loss trigger.
The target was lifted by 25%, with Liberty Mutual aiming to secure up to $300 million of coverage for losses from named storms and earthquakes affecting the US, Canada and the Caribbean.
Now, we’re told that the raised target has been secured and that the deal will provide the insurer with $300 million of reinsurance protection.
Mystic Re IV Ltd. will issue two tranches of Series 2021-2 notes providing Liberty Mutual with $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 launched at $180 million in size, but will now be a $225 million issue.
These notes were first offered to investors with price guidance in a range from 5.25% to 6%, but that range was narrowed to between 5.5% and 5.75% and we’re told the price has now been finalised at 5.5%, so a roughly 2% drop in price from the initial mid-point.
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 started with a $60 million target, but this layer will now offer $75 million of protection to Liberty Mutual. These notes were first offered with price guidance in a range from 11.25% to 12%, a range which was narrowed and fell to below the initial at 10.75% to 11.25% and we’re now told pricing has been finalised for this tranche at the low-end of 10.75%, representing a roughly 8% drop in price.
It seems investor appetite was stronger for the higher-yielding layer of this cat bond issuance, enabling Liberty Mutual to secure this reinsurance at attractive pricing and relatively low multiples.