Bermuda headquartered specialist reinsurer and third-party capital manager RenaissanceRe has now successfully secured $185 million of collateralized retrocessional reinsurance with its new Mona Lisa Re Ltd. (Series 2023-1) catastrophe bond, with the total falling just short of the maximum upsized target.
RenaissanceRe returned to the catastrophe bond market earlier in December, with a new issuance designed to provide some retrocessional protection for catastrophe risks in its own portfolio and that of its flagship partner capital vehicle DaVinci Re.
This is be the fourth Mona Lisa Re Ltd. catastrophe bond from RenaissanceRe (RenRe) and its first since mid-2021.
When RenRe first launched this new Mona Lisa Re 2023-1 catastrophe bond to the investor community, the company was seeking $150 million of retrocessional reinsurance protection from the capital markets.
The deal will provide RenRe itself and its equity-backed but balance-sheet sidecar-like DaVinci Re vehicle, with a three-year source of U.S., Puerto Rico, U.S. Virgin Islands, and D.C. named storm and earthquake reinsurance protection, as well as reinsurance cover for Canadian earthquakes.
The cat bond features an industry loss index trigger, with PCS the reporting agency across personal, commercial and auto line losses, and one tranche of notes are set to provide the sponsor with per-occurrence protection, with the other providing annual aggregate reinsurance.
As we reported last week, RenRe’s target for its new catastrophe bond had increased, with an update that saw the two tranches of notes pitched at between $75 million and $100 million in size, so the maximum deal size was lifted to $200 million.
Now, we’re told, that the Mona Lisa Re 2023-1 catastrophe bond has now been priced and it will provide RenRe and DaVinci Re with $185 million of catastrophe retro protection.
In the end, the Class A tranche of notes, that will provide RenRe and DaVinci Re with annual aggregate reinsurance protection have been priced at $85 million in size, so just short of the upper-end target.
The Class A aggregate notes come with an an initial base expected loss of 2.25% and were first offered to investors with price guidance in a range from 11.5% to 12.5%. That guidance was narrowed in the last update, to between 12% and 12.5% and we’re now told this tranche of notes priced to pay investors a coupon of 12.25%, so within guidance.
Meanwhile, the Class B tranche of notes, that will provide the cedents with per-occurrence reinsurance protection have secured the top size of $100 million, we understand.
The Class B occurrence cat bond notes come with an initial base expected loss of 3.2% and were first offered to investors with price guidance in a range from 12% to 13%. That price range was adjusted, again towards the upper-half to 12.5% to 13% at the last update for the deal and we’re now told have priced to pay investors a coupon of 12.5%, so at the middle of initial guidance.
In our last update on the Mona Lisa Re 2023-1 cat bond deal we explained that it appeared RenRe received strong indications of support from the cat bond market, which we understood to have been buoyed by some new capital inflows to investors making capacity more readily available.
It’s possible this has helped the company secure impressive execution, although this is clearly about providing realistic pricing in the initial guidance as well, so the deal didn’t have to be priced upwards, as so many other recent cat bonds have been.
We explained in our first article on the new RenRe cat bond that the price multiples on offer were already a significant uplift on previous Mona Lisa cat bond deals, which has helped the company price this new cat bond within its guidance, which has been a rarity since hurricane Ian.