RenaissanceRe, the Bermuda based specialist reinsurance firm and third-party capital manager, has lifted the targeted size for its new Mona Lisa Re Ltd. (Series 2023-1) catastrophe bond to $200 million, while the pricing of each tranche of notes being issued looks set to come in within guidance.
The reinsurer and capital manager returned to the catastrophe bond market earlier in December, with a new transaction designed to provide some protection for risks in its own portfolio and that of its flagship partner capital vehicle DaVinci Re.
This is going to be the fourth Mona Lisa Re Ltd. catastrophe bond from RenaissanceRe (RenRe) and its first since mid-2021.
There are signs with this issuance that RenaissanceRe has received strong indications of support from the cat bond market, which we understand has been buoyed by some new capital inflows to investors making capacity more readily available, according to sources.
When RenRe launched this new Mona Lisa Re 2023-1 catastrophe bond to investors, the company was seeking $150 million of protection from the capital markets.
The issuance will provide RenRe itself and the equity-backed but balance-sheet sidecar-like DaVinci Re 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 set to provide per-occurrence protection, with the other providing annual aggregate reinsurance.
Now, we understand that the targeted size of the issuance has been increased to $200 million, with each of the two tranches of notes now pitched at between $75 million and $100 million in size.
The Class A tranche of notes, that will provide RenRe and DaVinci Re with annual aggregate reinsurance protection and come with an an initial base expected loss of 2.25%, were first offered to investors with price guidance in a range from 11.5% to 12.5%.
We’re now told that the price guidance for the Class A notes has been adjusted to between 12% and 12.5%, so narrowing the range towards the upper-half.
Meanwhile, the Class B tranche of notes, that will provide the cedents with per-occurrence reinsurance protection and come with an initial base expected loss of 3.2%, were first offered to investors with price guidance in a range from 12% to 13%.
We’re now told that price guidance for the Class B tranche of notes has also been adjusted, again towards the upper-half with a new range of 12.5% to 13% marketed.
We understand some new investor demand appeared during the marketing of this cat bond, as a first update showed the size unchanged and the pricing being fixed at the top-ends of guidance, only for a second update to show the potential upsizing and a range of pricing from the mid-point to the top-end.
Which we’re told reflects the fact some new demand was seen, that it is believed can now help this cat bond execute on more favourable terms for the sponsor.
As a result, it looks like RenaissanceRe could upsize on this cat bond issuance, while also securing the pricing within initial guidance.
We explained in our first article on this new RenRe cat bond that the price multiples on offer here were already a significant uplift on previous Mona Lisa cat bond deals. It now seems that investors were happy with those, at least sufficiently happy for it to appear as if this could be one of the few cat bonds to price within its guidance since hurricane Ian.
We’ll update you as this deal moves towards its close. It settles in 2023, so will not be included in our 2022 catastrophe bond market issuance statistics.