Liberty Mutual targets $125m Mystic Re IV 2023-1 cat bond issuance

Liberty Mutual, the U.S. primary insurance giant and global reinsurance player, has returned to the catastrophe bond market in search of $125 million or more in collateralized reinsurance against peak peril events, with a Mystic Re IV Ltd. (Series 2023-1) transaction.

This is Liberty Mutual’s first catastrophe bond sponsorship of 2022, as it targets an expansion of its capital markets backed and multi-peril reinsurance protection.

It will be the eighth Mystic cat bond from sponsor Liberty Mutual and follows a similar format to its last deal in June 2021 (Mystic Re IV Series 2021-2), which was the insurers’ first indemnity cat bond issuance.

Using its Bermuda-based vehicle Mystic Re IV Ltd., sources said that this transaction will see a single tranche of Series 2023-1 Class A notes being issued, to provide Liberty Mutual with at least $125 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 understand, the same set of perils and territories as the June 2021 issuance from the insurer.

The new Mystic Re IV 2023-1 cat bond will provide Liberty Mutual with protection to the end of 2025, so covering three full calendar years.

We understand that the coverage will attach at $2.6 billion of losses to Liberty Mutual, providing reinsurance across a percentage of a layer of the carriers’ tower up to exhaustion at $4.1 billion, we’re told.

As a result, this new cat bond will sit a little higher up in the reinsurance tower for Liberty Mutual than the two tranches of its June 2021 issuance.

At the base modelled case, the attachment probability for the Class A notes is said to be 2.48%, while the initial expected loss is 1.74%.

The $125 million or more in Series 2023-1 Class A notes are being offered to investors with price guidance in a range from 8.5% to 9.25%, sources said.

Which would give the notes a multiple at market of roughly 5 times the base expected loss, if they price at the mid-point of guidance.

It’s good to see Liberty Mutual looking to bring additional catastrophe bond market capacity to support the reinsurance needs of its primary business.

Like the June 2021 indemnity cat bond for Liberty Mutual, this new issuance again doesn’t provide any coverage for the firm’s reinsurance underwriting business, we are told.

You can read all about this Mystic Re IV Ltd. (Series 2023-1) catastrophe bond from Liberty Mutual and every other cat bond issued in the Artemis Deal Directory.