U.S. insurer Travelers have successfully completed their latest catastrophe bond Long Point Re III Ltd. today. It’s Travelers third trip to the cat bond market with two previous deals, Longpoint Re Ltd. and Longpoint Re II Ltd., having been transacted previously. The successful issuance of this $250m cat bond takes 2012 volumes to $3.588 billion but also leaves the pipeline looking a little empty for the moment, rumours suggest that may change before month-end.
Long Point Re III has settled and ratings of the single $250m tranche of notes have been affirmed by Standard & Poor’s. The single tranche of notes provides Travelers subsidiaries with a $250m source of fully-collateralized reinsurance cover for northeastern U.S. hurricane risks via a reinsurance agreement and on a per-occurrence basis. The transaction provides cover over a three-year risk period and uses an indemnity trigger.
The single tranche of Series 2012-1 Class A notes cover a percentage of Travelers losses between the attachment point of $2 billion and the exhaustion point of $2.5 billion of the ultimate net losses of Travelers named subsidiaries in the covered region. For a loss to qualify it must be less than $20m per risk, or building covered under the transaction, which helps to lower the overall risk of the deal given it covers major U.S. northeast cities. The covered area will be Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, Vermont, Virginia, and the District of Columbia.
As we noted a few days ago in our Deal Directory entry for Long Point Re III the notes priced on 30th May to pay a 6% coupon to investors which was below the original expected amount and right at the bottom of a revised scale of pricing the deal was marketed at. This will have made the cover cheaper for Travelers and is largely due to demand from investors.
The protection provided by Long Point Re III is similar to that provided by the Class A notes of Longpoint Re II from 2009. These mature at the end of this year so Long Point Re III can be viewed as a replacement for this layer of cover.
S&P have assigned a ‘BB+’ rating to the $250m Series 2012-1 Class A notes that were issued by Long Point Re III.
This leaves every cat bond and ILS transaction in our Deal Directory completed. We hear rumours that some diversifying deals may begin marketing before the end of the month if the investment climate is right. We will update you when we hear that another cat bond or insurance-linked security deal is marketing.