2 months ago
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Liberty Mutual Insurance has returned to the catastrophe bond market with a target to secure at least $225 million of indemnity based catastrophe reinsurance protection from the capital markets through a Mystic Re IV Ltd. (Series 2025-1) issuance.
This is Liberty Mutual’s first venture into the catastrophe bond market this year, but notably this will be the tenth cat bond in the Mystic Re series from the company that we have analysed and listed in our Deal Directory.
It’s also a notable switch back to an indemnity cat bond for Liberty Mutual, having sponsored an industry-loss index trigger deal a year ago, which was its first such structure since 2020.
Since its first cat bond back in 2006, Liberty Mutual has used both industry loss and indemnity triggers to source catastrophe reinsurance and retrocessional protection to cover its peak peril exposures from capital market investors.
Another notable fact, is that this latest Mystic Re cat bond from the insurer features one annual aggregate tranche of notes, as well as two per-occurrence. We believe this could be the first sponsorship of an aggregate tranche of cat bonds by Liberty Mutual, which is interesting to see and may speak to the ability of the cat bond market to service the aggregate protection needs of major insurers, if the structure and terms are right.
View details of every catastrophe bond sponsored by Liberty Mutual in our Deal Directory, where you can filter the results by trigger type and other features.
For this 2024 cat bond issuance, that will come on-risk from 2025, Liberty Mutual is once again utilising its Bermuda-based special purpose insurer (SPI) Mystic Re IV Ltd.
We’re told that three tranches of Series 2025-1 notes are being offered to cat bond investors, designed to provide Liberty Mutual with at least $225 million in multi-peril collateralized reinsurance protection on both a per-occurrence and annual aggregate indemnity trigger basis.
The notes will provide reinsurance protection to Liberty Mutual and its affiliates across a three calendar year term, from January 1st 2025, we understand.
The Mystic Re IV 2025-1 cat bond will provide Liberty Mutual with reinsurance protection against losses from named storms and earthquakes on an indemnity basis across the first two tranches of notes, and those perils plus severe weather and wildfires from the final aggregate tranche of notes, with losses affecting parts of the US, Canada and the Caribbean all covered by all tranches under this cat bond.
A currently $125 million tranche of Class A notes will provide indemnity per-occurrence reinsurance cover, attaching at $2.5 billion of losses and exhausting at $3.8 billion, which gives them an initial attachment probability of 2.07%, an initial expected loss of 1.41%, and we’re told these notes are offered with spread price guidance in a range from 4.5% to 5%.
A currently $100 million Class B tranche will also provide indemnity per-occurrence reinsurance cover, but attaching lower down at $1 billion of losses and exhausting at $1.75 billion, which gives them an initial attachment probability of 7.88%, an initial expected loss of 5.16%, and we’re told these notes are offered with spread price guidance in a range from 11% to 11.75%.
The final Class C tranche of notes are as yet unsized and will provide Liberty Mutual indemnity annual aggregate reinsurance protection for losses from named storms, earthquakes, severe weather and wildfires, we are told. These notes would attach their coverage after $2.4 billion of losses and protect the insurer to $2.9 billion, but feature a $100 million event deductible and also a cap for fire events outside of California at $500 million.
The Class C aggregate notes come with an initial attachment probability of 5.03%, an initial expected loss of 4.06%, and we’re told these notes are offered with spread price guidance in a range from 13.5% to 14.5%.
Liberty Mutual has significant room to upsize this new Mystic Re IV 2025-1 catastrophe bond should pricing and market conditions prove conducive to do so.
Given the spread tightening recently seen in the market, it will be interesting to see how strong investor appetites are for this cat bond issuance from one of the biggest insurers.
You can read all about this Mystic Re IV Ltd. (Series 2025-1) catastrophe bond from Liberty Mutual and every other cat bond issued in the Artemis Deal Directory.
English (US) ·