Bermuda based specialist reinsurance firm and third-party capital manager RenaissanceRe has returned to the catastrophe bond market to sponsor a $150 million or greater Mona Lisa Re Ltd. (Series 2023-1) cat bond, to cover risks in its own portfolio and that of its flagship partner capital vehicle DaVinci Re.
This will be the fourth Mona Lisa Re Ltd. catastrophe bond from RenaissanceRe (RenRe) and its first since mid-2021.
It sees the reinsurance company returning for coverage across a similar range of perils, with two tranches of Series 2023-1 cat bond notes set to be issued and sold to investors and the proceeds used to collateralized retrocessional reinsurance agreements between the issuer Mona Lisa Re Ltd. and the ceding companies, RenRe itself and the equity-backed but balance-sheet sidecar-like DaVinci Re.
We’re told this Mona Lisa Re 2023-1 catastrophe bond will provide the ceding companies with a three-year source of U.S., Puerto Rico, U.S. Virgin Islands, and D.C. named storm and earthquake protection, as well as protection for Canadian earthquakes.
The cat bond will feature an industry loss index trigger, with PCS the reporting agency across personal, commercial and auto line losses, and one tranche of notes will provide per-occurrence protection, with the other providing annual aggregate reinsurance, we understand.
Bermuda-based Mona Lisa Re Ltd. will issue a $75 million tranche of Class A notes that will provide RenRe and DaVinci Re with annual aggregate reinsurance protection and come with an initial attachment probability of 2.76%, an initial base expected loss of 2.25% and are being offered to investors with price guidance in a range from 11.5% to 12.5%.
Qualifying events for the aggregate tranche of coverage must breach a franchise deductible level on the industry loss index, we’re told.
A similarly $75 million Class B tranche of notes will provide the cedents with per-occurrence reinsurance protection and come with an initial attachment probability of 3.63%, an initial base expected loss of 3.2% and are being offered to investors with price guidance in a range from 12% to 13%.
For comparison, the Mona Lisa Re Ltd. (Series 2020-1) cat bond featured an aggregate tranche of notes with an expected loss of 2.52% and the notes priced at 7.5%, a multiple of 2.98, while a per-occurrence tranche of notes issued had an expected loss of 3.46% and priced at 8%, a multiple of 2.3.
We can also compare the single aggregate tranche of notes from the more recent Mona Lisa Re Ltd. (Series 2021-1) cat bond, which had an expected loss of 3.71% at launch and priced to pay a coupon of 7%, a multiple of 1.89.
So, with the aggregate tranche of this new Mona Lisa Re 2023 cat bond having a multiple-at-market of 5.33 times the initial expected loss, and the occurrence tranche having a multiple of 3.9 times the EL, it’s clear the new deal comes at a much higher price than the previous cat bonds RenRe has sponsored.
This new cat bond from RenRe won’t be issued until January, we’re told, making it the first deal of the New Year to begin marketing so far.
It’s encouraging to see RenRe returning to the cat bond market at this time and perhaps reflects the companies desire to secure the retrocession it needs for the coming year, at a time when the traditional retro market may be more capacity-strained than the catastrophe bond sector.