The latest catastrophe bond from U.S. primary insurer Safepoint, the Manatee Re III Pte. Ltd. (Series 2019-1) transaction which is being issued out of Singapore, looks set for pricing above the initial guidance range, as investors demand more return for the risk they are taking on.
Safepoint’s latest and fourth catastrophe bond is among the first full 144a catastrophe bond to be issued in Singapore under its new insurance-linked securities (ILS) regulatory regime.
The transaction was launched to cat bond and ILS investors recently, with the Manatee Re III deal targeting $75 million of reinsurance protection for sponsor Safepoint, across two issued tranches of cat bond notes.
The Manatee Re III Pte. 2019 cat bond is set to offer its sponsor Safepoint a source of indemnity based reinsurance across a three-year term, providing cascading and per-occurrence reinsurance protection against losses from named storms and severe thunderstorms in Florida, Louisiana, New Jersey & Texas.
Manatee Re III Pte. Ltd. is still set to issue two tranches of notes, exposed to different risk levels, but the proposed sizes have changed a little and the pricing has risen above the top-end of the initial ranges.
The first tranche of Series 2019-1 Class A notes had been targeting $50 million, but this we’re now told is targeting a $20 million to $40 million tranche of notes.
The Class A notes have an initial expected loss of 1.15% and were at first offered to investors with pricing guidance of 4.5% to 5%, but we’re now told the guidance has risen to 5.25%, so above the initial range.
The second tranche of Series 2019-1 Class B notes began targeting $25 million of reinsurance coverage for Safepoint and we’re told are still aiming for that, with a proposed $20 million to $30 million sizing.
With an initial expected loss of 4.23%, the Class B tranche notes will sit below the Class A notes, being more risky as a result. This layer was initially offered to investors with price guidance of 8.75% to 9.25%, but we’re now told the coupon has risen to above that range at 9.5%.
The increase in pricing is a sign of reinsurance market conditions for the Florida region at these renewals, after excessive losses and loss adjustment expenses totaled many insurers protection in the prior years.
As a result Florida focused insurers are having to pay for their coverage in 2019 and the catastrophe bond market and its investors are demonstrating an appetite to secure higher returns from these hurricane exposed risks, following recent losses.
We’ll update you as the Manatee Re III Pte. Ltd. (Series 2019-1) catastrophe bond from Safepoint comes to market in Singapore and you can read all about this and every other cat bond deal in the Artemis Deal Directory.
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