Safepoint’s Manatee Re cat bond marked down significantly on Ida loss

Both tranches of Safepoint Insurance Company’s most recent catastrophe bond, the $40 million Manatee Re III Pte. Ltd. (Series 2019-1) transaction, have now been marked down significantly in the secondary market on potential losses of principal driven by hurricane Ida’s impacts.

Safepoint’s two tranches of catastrophe bond notes from the Manatee Re III transaction provide the insurer with collateralised reinsurance capacity covering US named storms and severe thunderstorms across the states of Florida, Louisiana, New Jersey & Texas.

After hurricane Ida struck Louisiana at the start of September, the two tranches of notes had been marked down for possible losses.

But to begin, the tranches of notes were only marked down around 20%, implying some uncertainty in the cat bond market over how significant its reinsurance recoveries might be from the hurricane.

Both tranches of notes issued through the Manatee Re III cat bond provide Safepoint with $20 million each of per-occurrence indemnity reinsurance protection.

The first tranche to get marked down further was the Class B layer, which at issuance had an initial expected loss of 4.23% and sat below the less risky Class A notes, that had an expected loss of 1.15%.

The $20 million Class B notes saw their pricing slashed down to bids of just 2 to 5 cents on the dollar in some cat bond broker secondary market pricing sheets around mid-October, suggesting the market was expecting the riskier layer of the Manatee Re III cat bond to face a total loss at that time.

It’s likely this came after a loss estimate update from the sponsoring insurer Safepoint.

Now, we’re told that the secondary market price for the less risky Class A notes, that sit above the Class B’s, have also seen their value slashed further in the last week, with some sheets now showing this tranche at bids as low as 15 cents.

Which suggests that Safepoint’s ultimate losses from hurricane Ida have now risen to a level that is now expected to eat roughly 85% through the upper-layer of the Manatee Re III catastrophe bond deal, implying an increasing level of reinsurance recoveries for the insurance company.

At this time it now looks like the majority of the $40 million Manatee Re III catastrophe bond will payout to the benefit of Safepoint, adding to cat bond investor losses from hurricane Ida.

As we explained earlier today, loss expectations for Louisiana Citizens catastrophe bonds have also risen.

You can view details of many catastrophe bond defaults and losses in our Directory.