Vermont Mutual’s $150m Baldwin Re cat bond set for 25% price drop

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 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 transaction then upsized, to provide the insurer and its subsidiaries Northern Security Insurance Company, Inc. and Granite Insurance Company, with $150 million of reinsurance protection against losses from certain catastrophe events in the US Northeast, named storm, earthquake, severe weather, fire and other peril events.

Now, we’re told that the notes have been priced with a coupon at the low-end of already reduced guidance, representing a roughly 25% drop in price from the initial guidance mid-point.

So, the notes issued by Baldwin Re will provide Vermont Mutual Insurance and its subsidiaries with a $150 million capital markets backed source of indemnity reinsurance protection, on a fully-collateralized and per-occurrence basis, across a four-year term to the end of June 2025.

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

At the initial marketing of this first Baldwin Re cat bond, the notes were offered to investors with price guidance in a range from 2.75% to 3.25%.

That price guidance was then reduced, thanks to ample investor demand for the deal and lowered to a range of 2.25% to 2.75%.

Now, we’re told the $150 million of notes have been priced and will pay a 2.25% coupon to investors, which represents the roughly 25% price drop from the middle of the initially marketed guidance range.

Which is a strong result for Vermont Mutual and yet another catastrophe bond that has been favourably received by investors and thus experienced strong execution.

You can read all about this new Baldwin Re Ltd. (Series 2021-1) catastrophe bond and every other cat bond deal in our extensive Artemis Deal Directory.