The Travelers Companies, the US property & casualty insurance giant, has clearly had a positive experience in the catastrophe bond market with its new Long Point Re IV Ltd. (Series 2022-1) issuance, as the carrier is looking to perhaps double its size to as much as $600 million.
At that size, the Long Point Re IV 2022-1 catastrophe bond from Travelers would be one of the biggest of the year, providing a significant slice of the insurers reinsurance program needs.
With a $500 million Long Point Re III Ltd. (Series 2018-1) catastrophe bond scheduled to mature in the next few weeks, Travelers now looks set to at least replace that capital markets backed reinsurance protection, perhaps upsize on it.
Travelers returned to the cat bond market just over a fortnight ago, with a target to secure at least $300 million of multi-peril northeast US catastrophe reinsurance protection from this new cat 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.
But our sources have now told us that the latest guidance for this cat bond issue suggests it will settle at between $500 million and $600 million in size, so at least replacing the maturing 2018 cat bonds cover.
The reinsurance arrangement will protect Travelers against losses from U.S. tropical cyclone, earthquake, severe thunderstorm, and winter storm events, across Northeastern U.S. states only, the same perils as its maturing 2018 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 expected to be up to $600 million in size, have an attachment point at $2.2 billion of losses and would exhaust their coverage at $2.9 billion.
They come with an initial attachment probability of 1.348%, and initial expected loss of 1.127% and were at first offered to cat bond investors with price guidance in a range from 3.75% to 4.25%.
Now, we’re told the price has risen. But unlike many recent deals that have priced above guidance, it has only risen to the top-end of guidance so far, to offer investors a coupon of 4.25%.
As we explained earlier today, well-respected, repeat cat bond sponsors and those that have avoided any unexpected loss impacts to their cat bonds and reinsurance deals, are clearly being favoured by cat bond investors at this time. The same kind of differentiation seen in the traditional market.
Travelers, as a very large and respected cat bond sponsoring primary insurer, has clearly benefited from this in the reception it has had from the cat bond community with its latest deal.
But it is also noteworthy, as we explained towards the end of our last article on the launch of this deal, that the multiple-at-market being offered is well up on the maturing 2018 deal.