Coupon price guidance for the new $100 million Pelican IV Re Ltd. (Series 2017-1) catastrophe bond, which is sponsored by Louisiana Citizens Property Insurance Corporation, has been lowered to below the launch level, as cat bond investors continue to demonstrate their appetite for new issues.
Almost every tranche of catastrophe bond notes issued in recent months has seen its price guidance reduced while the book was being run, with final pricing often achieved at levels below the initial spread guidance.
The trend continues, as the catastrophe bond and insurance-linked securities (ILS) investment community demonstrates its ability to take on insurance and reinsurance risk at very competitive pricing levels.
The Pelican IV Re 2017 cat bond sees Louisiana Citizens looking for reinsurance coverage on a more remote, higher layer of its tower than secured in its three previous cat bond deals. The cat bond will attach at $350 million of Louisiana named storms losses, with the reinsurance protection afforded on a per-occurrence basis and using an indemnity trigger structure.
The Pelican Re IV 2017-1 cat bond notes were initially offered to ILS investors with coupon guidance of 2.75% to 3.25%, which with the initial expected loss set at 0.86% reflected a relatively high multiple at market, as we stated in our previous article.
The ILS investor market agreed it seems and sources tell us that the $100 million of Pelican IV Re notes are now being offered to cat bond investors with lowered price guidance of 2.25% to 2.75%.
So once again a cat bond looks set to price at or below the initial guidance that was given, thanks to demand which is supporting cat bond sponsors ability to secure reinsurance protection at very cost-effective levels.
As we understand it the transaction size has not changed and remains $100 million.