The tranche B class of catastrophe bond notes which were being offered as part of Safepoint Insurance Company’s latest cat bond deal Manatee Re Ltd. (Series 2016-1) have been pulled from the offering, according to sources.
When the Manatee Re 2016-1 cat bond launched it featured three tranches of notes, covering different layers of the insurers reinsurance tower. Last week the pricing guidance was revised upwards on the lowest risk Class A tranche of notes, but in the latest update the cat bond is now only a two tranche deal.
The Manatee Re 2016-1 cat bond launched as a $100m deal, with a $50m Class A tranche, a $30m Class B tranche and a $20m Class C tranche. At the latest update sources said that just the Class A and C tranches remain, with the Class A tranche now pushing for $50m to $75m of cover for Safepoint, while the Class C tranche remains $20m in size.
The attachment points and expected losses of the two remaining tranches are the same, with no changes made meaning that Safepoint’s reinsurance tower will now see a gap where the Class B tranche would have sat.
The Class B tranche were designed to sit alongside the insurers Florida Hurricane Catastrophe Fund (FHCF) reinsurance layer, perhaps designed to help it reduce its reliance on the FHCF. It’s not clear whether that had any bearing on this tranche being pulled from the offering or whether it is simply a case of investor feedback being most positive on the Class A and C tranches.
The price guidance for the now set to expand Class A tranche has been fixed at 5.25%, we understand, the mid-point of the revised upwards range.
The other remaining tranche of Class C notes also look set to price towards the upper end of initial guidance, having launched with a marketed coupon range of 15.25% to 16.25%, which has now been narrowed to 16% to 16.25%.
So overall the Manatee Re 2016-1 catastrophe bond is now set to secure Safepoint between $70m and $95m of collateralised reinsurance protection, with pricing at or near the upper end of initial guidance, it seems.
The investor response to the transaction does, again, seem to have been healthy. With ILS investors demanding minimum returns for cat bond transactions, seeing pricing rising above the mid-points of guidance and this one tranche pulled (although the reason for that is unknown at this time).
Safepoint’s Manatee Re Ltd. (Series 2016-1) catastrophe bond transaction is scheduled to complete in the coming week.