Price guidance has fallen for the Wrigley Re Ltd. (Series 2021-1) catastrophe bond transaction, that is being issued to provide parametric earthquake insurance protection to Gryphon Mutual Insurance Company, a real estate captive insurer owned by investment giant Blackstone.
The Wrigley Re 2021-1 parametric California earthquake cat bond remains at $50 million in size we understand at this time, but the protection looks set to come in at a lower coupon than initially marketed.
As we explained when this cat bond deal launched earlier this month, Gryphon Mutual Insurance Company, Blackstone’s property insurance captive, entered the catastrophe bond market with the help of global reinsurance firm Hannover Re.
Hannover Re is acting as the ceding reinsurance company for this deal, interfacing with the capital markets investors on behalf of Gryphon Mutual Insurance, which is the ceding insurer that will benefit from the reinsurance protection the notes provide.
Blackstone established Gryphon Mutual Insurance as a real estate property focused captive insurer in 2020 and said at the time the captive would give it more control over its property insurance program and help to reduce costs for the company.
Accessing the capital markets for a slice of responsive parametric earthquake coverage is one way the captive is now set to drive benefits for Blackstone, as the investment giant’s exposure to property damage in California is likely significant, both through its investment holdings and potentially also for covering its staff and operations there.
Wrigley Re Ltd. is still on track to issue a single $50 million tranche of Series 2021-1 Class A notes, that will provide a source of fully-collateralized reinsurance protection against losses from California earthquakes on a parametric trigger and per-occurrence basis, to Gryphon Mutual, but ultimately to the benefit of Blackstone itself.
The coverage will run across a roughly three-year term to the end of June 2024 and is focused on specific calculation locations for the earthquake parametric trigger.
The $50 million of notes to be issued by Wrigley Re Ltd. will have an initial expected loss of 0.99% and were first offered to cat bond investors with price guidance in a range from 2.75% to 3.25%.
Now, that price guidance has been reduced, with the revised coupon range falling to 2.25% to 2.75%, we’re told.
At the mid-points, that represents a roughly 17% decline in pricing while being marketed.
As a result, it looks like the parametric insurance protection Blackstone and its captive insurer will benefit from with its first catastrophe bond could come in at very attractive pricing.