The pricing on one of the catastrophe bonds currently in the market has dropped again, resulting in final pricing sitting right at the bottom of an already reduced range. The Tar Heel Re Ltd. (Series 2013-1) cat bond, which is being marketed for the North Carolina Joint Underwriters Assn. (NCJUA) and the North Carolina Insurance Underwriters Assn. (NCIUA), is again demonstrating the way strong investor appetite can apply pricing pressure on cat bond transactions.
The Tar Heel Re cat bond began its life being marketed at an initial size of $200m and with a coupon range of 9% to 10%. Last week we reported that the deal had grown in size by 150%, more than doubling up to $500m, and at the same time reported that the pricing on the transaction had dropped during marketing, with the expected range reduced to 8.5% to 9%.
Now, having achieved its final pricing yesterday, we understand that the Tar Heel Re cat bond will pay its investors a coupon of just 8.5% above the collateral investments yield. So the pricing on this cat bond dropped down to the bottom end of an already reduced range and the deal will close offering an increased level of hurricane protection at a more attractive price for the two North Carolina wind pools.
The transaction is due to officially close in a weeks time and we’ll update you when it has.