U.S. primary insurer Safepoint’s latest catastrophe bond, the Manatee Re III Pte. Ltd. (Series 2019-1) transaction which is being issued out of Singapore, has shrunk to just $40 million in size, while pricing has been fixed above guidance.
Safepoint’s newest and fourth catastrophe bond is one of the first full 144a catastrophe bond to be issued in Singapore, under its new insurance-linked securities (ILS) regulatory regime.
The transaction launched to cat bond and ILS investors recently as a Manatee Re III offering targeting $75 million of reinsurance protection for sponsor Safepoint, across two issued tranches of cat bond notes.
The deal saw its price guidance rise during marketing, to above the initial coupon guidance ranges, while at the same time there was a suggestion that it could shrink.
It’s now become apparent that the Manatee Re III cat bond could not achieve its initial targeted size, with both tranches of notes offered shrinking to just $20 million each, for a total offering size of $40 million.
The Manatee Re III Pte. 2019 cat bond will provide sponsor Safepoint with 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.
Two tranches of notes will be issued by Manatee Re III Pte. Ltd., exposed to different risk levels.
The first tranche of Series 2019-1 Class A notes had been targeting $50 million at first, then the target slipped to $20 million to $40 million, but we’re now told this has only achieved $20 million in size.
The Class A notes, which have an initial expected loss of 1.15%, were at first offered to investors with pricing guidance of 4.5% to 5%, but eventually priced at 5.25%, so above the top-end of the initial coupon target range.
The second tranche of Series 2019-1 Class B notes began targeting $25 million of reinsurance coverage for Safepoint, but has also now been fixed at $20 million, we understand.
With an initial expected loss of 4.23%, the Class B tranche notes are more risky and so their initial price guidance was 8.75% to 9.25%, However the coupon has now been fixed at 9.5%, so above the top-end of the initial target range.
Catastrophe bond investors continue to demonstrate their desire to earn a higher return for Florida exposed property catastrophe reinsurance risks in 2019, while with the renewals approaching insurers are having to balance traditional and alternative sources of capacity to secure best execution of their programs.
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