The latest catastrophe bond to be sponsored by global reinsurance company Swiss Re has seen its pricing rise during its marketing we’re told, while the target for $150 million of catastrophe retrocession from the Matterhorn Re Ltd. (Series 2021-1) cat bond hasn’t changed.
Swiss Re returned to the catastrophe bond market with its first Matterhorn Re issuance of 2021 almost a fortnight ago, as we explained at the time in our first article on this deal.
With what will be the firm’s seventh Matterhorn Re cat bond, Swiss Re is aiming to secure an additional multi-year source of collateralized multi-peril retrocessional reinsurance protection, to protect it against losses from these perils on an industry loss basis.
Swiss Re’s Bermuda based special purpose insurer Matterhorn Re Ltd. was targeting an issuance of a single $150 million or larger tranche of Series 2021-1 Class A cat bond notes, that would be sold to investors and the proceeds used to collateralise retrocessional reinsurance agreements between the SPI and the reinsurer.
The targeted $150 million or more of collateralized retrocessional reinsurance would protect Swiss Re against certain U.S. named storm and U.S. and Canadian earthquake losses, with the U.S. named storm protection running all the way from Texas around to the Northeast.
The Matterhorn Re 2021-1 cat bond notes will provide Swiss Re with protection across a roughly four year period, to early December 2025, so covering four U.S. hurricane seasons, on a per-occurrence basis, using weighted industry loss index triggers from PCS.
We’re now told by sources that the issuance has not upsized at this time, with still $150 million of Series 2021-1 Class A notes on offer to investors.
The notes, which have an initial attachment probability of 4.29% and a combined expected loss of 3.32%, were first offered to cat bond investors with price guidance in a range from 5.25% to 5.75%.
We’re now told that this pricing has been fixed at the upper-end of that range, at 5.75%.
This reflects cat bond investor desire to receive coupons that are commensurate with the risks being assumed and further demonstrate that investors hurdles need to be met, in order to get the desired execution in terms of coverage.
We are beginning to see an increasing number of deals that don’t price down, or where pricing actually moves up, suggesting cat bond fund managers and investors are holding a line on returns, below which they do not want to fall.
Swiss Re has secured $1.61 billion of retrocessional reinsurance from six Matterhorn Re catastrophe bonds so far, with each largely focused on property catastrophe risks, but with one of the cat bonds also including an element of extreme mortality protection.
Swiss Re has always been one of the most prolific sponsors of catastrophe bonds since the market began and currently sits at sixth place in our leaderboard of outstanding cat bond sponsors.