The new Mystic Re IV Ltd. (Series 2021-1) catastrophe bond transaction sponsored by insurance giant Liberty Mutual has been upsized during its marketing, growing by 50% to now feature an issuance of $300 million of notes to support reinsurance protection for the carrier.
Liberty Mutual returned to the catastrophe bond market recently to sponsor its first issuance since 2012.
For 2020, Liberty Mutual has reverted to use of an industry loss trigger, its previous Mystic Re III cat bond in 2012 having been indemnity trigger based.
Interestingly, this 2020 return coincides with Liberty Mutual becoming much more active in the retrocessional reinsurance market this year, as we’re told by our sources that the company has been a significant quoter in early retro renewals.
Back to this year’s catastrophe bond.
Liberty Mutual is seeking three years U.S. multi-peril reinsurance coverage against certain losses from U.S. named storms and U.S. & Canada earthquakes, with the covered area including Puerto Rico, DC and the U.S. Virgin Islands, on a per-occurrence basis and using an industry loss trigger.
Mystic Re IV Ltd., a newly registered Bermuda SPI, will issue one tranche of notes that will be sold to cat bond investors and the proceeds used to collateralized underlying reinsurance agreements between Mystic Re IV and Liberty Mutual Insurance.
The issuance launched with a target for $200 million of protection for Liberty Mutual, but we’re now told this has increased by 50% to become a $300 million issue.
The now $300 million of notes will have an initial expected loss of 4.55%. They were first offered to cat bond funds and investors with coupon price guidance in a range from 9.25% to 10%, but we’re told that price guidance has now narrowed and fallen, with an amended range of 9% to 9.25% now offered.
So for Liberty Mutual this looks like being a very successful return to the catastrophe bond market, with this Mystic Re IV cat bond in 2020 set to be second in size only to one of its cat bonds in 2006.