Swiss Re Insurance-Linked Fund Management

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RenaissanceRe’s Mona Lisa Re cat bond completes, receives broad investor support


The first broadly marketed 144A catastrophe bond from Bermuda based reinsurer RenaissanceRe has now completed successfully, providing the reinsurer with a $150m source of multi-year retrocessional U.S. hurricane and earthquake reinsurance protection. Mona Lisa Re Ltd. (Series 2013-2) has now settled, received its full rating and listed in Bermuda.

While this is the first cat bond from RenaissanceRe to be marketed with a book to multiple investors, it is not the first cat bond issuance from the reinsurer this year, or indeed from its Mona Lisa Re Ltd. special purpose insurance vehicle. A Series 2013-1 issuance was privately placed with a single investor earlier this year, believed to be a transaction undertaken directly with Swiss based ILS investment manager LGT.

With this Mona Lisa Re 2013-2 cat bond RenRe has transferred a portion of its named storm (so hurricane and tropical storm) and earthquake (with fire following) risks to capital market investors. Mona Lisa Re Ltd., a Bermuda domiciled special purpose insurer, has issued and sold a single $150m tranche of Series 2013-2 notes to collateralize an underlying reinsurance agreement with the two sponsors, RenaissanceRe and RenRe’s joint-venture reinsurance vehicle DaVinci Re.

The transaction launched as a $125m tranche of notes but investor demand helped it to increase by 20% to $150m. At the same time the pricing dropped from a marketed range of 7% to 7.6% to complete offering investors a 7.3% interest spread.

The notes cover losses from an attachment point of $875m to an exhaustion point of $1.125 billion over a four-year risk period and the deal features a PCS based industry loss trigger on a state weighted annual aggregate basis.

We understand that investors were pleased to see a RenaissanceRe sponsored cat bond being marketed more widely and the deal received strong support from a broad range of investors.

The mix of investors the deal was placed with includes; dedicated ILS and catastrophe funds making up 61% of the cat bonds placement, hedge funds at 27%, larger institutional investors such as pension funds and endowments at 6%, other asset managers at 6% and reinsurers at 1%. The investors were, we understand largely U.S. based with 82% of those participating in the cat bond transaction based there. 16% of the investors were European and another 3% were based in Asia.

The Mona Lisa Re Ltd. principal at risk variable rate note program and the single tranche of $150m Series 2013-2 notes issued in this cat bond have both been admitted for listing on the Bermuda Stock Exchange. Prime Management Ltd. acted as listing sponsor.

Ratings agency Standard & Poor’s assigned its ‘BB-(sf)’ rating to the $150m Class A, Series 2013-2 notes issued by Mona Lisa Re Ltd.

You can read much more about this catastrophe bond in the entry for Mona Lisa Re Ltd. (Series 2013-2) in our Deal Directory. It will be interesting to see whether cat bonds become a regular part of RenRe’s risk transfer and reinsurance capital management activities.

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