Vermont Mutual aims to upsize first cat bond to $150m, at reduced pricing

Vermont Mutual Insurance Company is targeting an increased size for its first Baldwin Re Ltd. (Series 2021-1) catastrophe bond, with the issuance now set to provide it with $150 million of reinsurance cover against losses from multi-peril events in certain north east US states.

Vermont Mutual Insurance, one of the oldest property and casualty insurers in the United States, entered the catastrophe bond market for the first time at the beginning of this month, targeting $100 million of reinsurance from the Baldwin Re issue.

The mutual insurer underwrites predominantly through itself and subsidiaries Northern Security Insurance Company, Inc. and Granite Insurance Company, all of which will be covered by the reinsurance from this first cat bond.

Baldwin Re Ltd. will now issue a $150 million Series 2021-1 Class A tranche of notes, to provide Vermont Mutual Insurance and subsidiaries with reinsurance protection against losses from certain catastrophe events in the US Northeast, named storm, earthquake, severe weather, fire and other peril events, we understand.

The covered area is the north east US states where the company operates, namely Connecticut, Maine, Massachusetts, New Hampshire, New York, Rhode Island and also Vermont.

The notes will provide Vermont Mutual Insurance and subsidiaries with a capital markets backed source of indemnity reinsurance protection from the capital markets, on a fully-collateralized and per-occurrence basis, across a four-year term to the end of June 2025.

The now targeted $150 million of notes will attach at $450m of losses to the insurer and exhaust at $850m, which gives them an initial attachment probability of 1.311% and an expected loss of 0.91%.

The notes were first offered to cat bond investors with price guidance in a range from 2.75% to 3.25%, but we understand that, like most other recent cat bonds, the guidance has been lowered and now stands at 2.25% to 2.75%, suggesting another deal that prices at the bottom-end or lower.

We’ll keep you updated as this new Baldwin Re Ltd. (Series 2021-1) catastrophe bond comes to market and you can read all about this and every other deal in the Artemis Deal Directory.