Liberty Mutual, the US primary insurer and global reinsurer, has successfully secured the upsized target of $150 million of collateralized reinsurance protection with its new Mystic Re IV Ltd. (Series 2023-1) catastrophe bond transaction.
Liberty Mutual came back to the catastrophe bond market with what will be its eighth Mystic cat bond deal in late November.
But the company raised its target last week for its latest cat bond deal and has now successfully secured that additional investor support.
As a result, the now $150 million Mystic Re 2023-1 catastrophe bond will offer Liberty Mutual collateralized reinsurance protection, on a per-occurrence and indemnity trigger basis, to provide additional reinsurance protection against losses from named storms and earthquakes affecting the US, Canada and the Caribbean, across a three-year term.
So, Mystic Re IV Ltd. will issue and sell to cat bond investors a single $150 million tranche of Series 2023-1 Class A notes, with the proceeds used to collateralize the underlying reinsurance agreement between the SPI and Liberty Mutual.
The $150 million of cat bond notes come with an initial attachment probability of 2.48%, an initial expected loss of 1.74% and were initially offered to investors with price guidance in a range from 8.5% to 9.25%.
As the coupon was priced at the top-end of that range, at 9.25%, this new Mystic Re IV cat bond will pay investors a multiple-at-market of 5.3 times the base expected loss.
It’s a significantly higher multiple paid than for Liberty Mutual’s June 2021 catastrophe bond issuance, but aligned with other recent deals brought to market in the fourth quarter of 2022.
Once this new cat bond has completed later this month, Liberty Mutual will have $750 million of catastrophe bonds outstanding that provide the company with reinsurance from the capital markets.