US property & casualty insurance giant The Travelers Companies now successfully priced its latest catastrophe bond, with the Long Point Re IV Ltd. (Series 2022-1) issuance securing the carrier $575 million of collateralized catastrophe reinsurance.
This will now more than renew and replace the $500 million Long Point Re III Ltd. (Series 2018-1) catastrophe bond that is scheduled to mature in the next few weeks.
Travelers returned to the cat bond market in late April, with a target to secure at least $300 million of multi-peril northeast US catastrophe reinsurance protection from its latest catastrophe bond deal.
Long Point Re IV Ltd. was seeking to issue a single tranche of Series 2022-1 Class A notes, with a preliminary size of $300 million.
We then learned that the latest guidance for the cat bond suggested it would settle at between $500 million and $600 million in size, so at least replacing the maturing 2018 cat bonds cover.
Now, Artemis can confirm that the issuance has been priced and as a result Travelers is on-course to secure $575 million of reinsurance from its Long Point Re IV 2022-1 cat bond issuance.
So, Travelers will now get $575 million of reinsurance against losses from U.S. tropical cyclone, earthquake, severe thunderstorm, and winter storm events, across Northeastern U.S. states only with this new cat bond.
The Long Point Re IV 2022-1 cat bond notes will provide Travelers with reinsurance across a four year term, on an indemnity trigger and per-occurrence basis.
The single tranche of Class A notes, which is now confirmed as $575 million in size, have an attachment point at $2.2 billion of losses and would exhaust their coverage at $2.9 billion, giving an initial attachment probability of 1.348%, and initial expected loss of 1.127%.
As we’d previously explained, the notes were first offered to cat bond investors with price guidance in a range from 3.75% to 4.25%, but that was then fixed at the top-end of guidance, to offer investors a coupon of 4.25%, which is where the cat bond has now been priced.
This is a good result for Travelers, in securing its latest catastrophe bond backed reinsurance priced within the initial guidance, unlike so many other recent deals that have priced above.
However, it is also noteworthy, as we explained towards the end of a previous article on this deal, that the multiple-at-market being offered is well up on the maturing 2018 deal anyway, so perhaps just a more reasonable place to start building the book from.
At $575 million in size, Travelers new catastrophe bond is the largest issuance of 2022 so far.
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