1 week ago
5
Pricing has tightened further for two of the tranches of notes being issued as part of Liberty Mutual’s new Mystic Re IV Ltd. (Series 2025-1) catastrophe bond, as the insurer looks set to be another to benefit from strong investor demand and strong cat bond execution in the primary market.
Liberty Mutual Insurance returned in November with an initial target to secure at least $225 million of indemnity based catastrophe reinsurance protection from the capital markets through this Mystic Re IV 2025-1 cat bond deal.
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.
At that time, just two tranches of per-occurrence notes had been given size guidance while market appetite for an annual aggregate layer was still being assessed, it seemed.
In a first update, the annual aggregate tranche of notes were also given a size target, which took the total offering to $325 million in size, while at the same time the pricing was lowered somewhat.
Now, we’re told the size target has remained static, but price guidance for two of the tranches of notes on offer has fallen further, indicating even stronger execution for the sponsor.
Mystic Re IV Ltd. will issue three tranches of Series 2025-1 notes to provide Liberty Mutual with $325 million in multi-peril collateralized reinsurance protection on both a per-occurrence and annual aggregate indemnity trigger basis, across a three calendar year term, from January 1st 2025.
This Mystic Re IV 2025-1 cat bond will provide Liberty Mutual with reinsurance against losses from named storms and earthquakes on an indemnity basis across the first two tranches of notes, and those perils as well as severe weather and wildfires from the third annual aggregate tranche of notes, with the covered area being parts of the US, Canada and the Caribbean.
At this latest update there have been no changes to the size of the cat bond tranches Mystic Re IV is going to issue, but pricing has tightened again for the two occurrence tranches of notes.
The $125 million tranche of Class A notes will provide indemnity per-occurrence reinsurance, have an initial expected loss of 1.41%, and were first offered with spread price guidance in a range from 4.5% to 5%, which was first lowered to an updated range of between 4% and 4.5%, but has now fallen again to a fixed 4% spread, sources told us.
The $100 million Class B tranche will also provide indemnity per-occurrence reinsurance cover, but have an initial expected loss of 5.16%, and were first offered with spread price guidance in a range from 11% to 11.75%, first fell to a revised range of 10.5% to 11%, but have now seen the guidance reduced again and tightened to 10.25% to 10.5%.
The final Class C tranche of notes will provide Liberty Mutual with $100 million of indemnity annual aggregate reinsurance protection. They have an initial expected loss of 4.06%, and were first offered with spread price guidance in a range from 13.5% to 14.5%, but at the first update the spread was fixed at 14% for this aggregate layer and we’re told this is where it has stayed.
This is the first aggregate cat bond tranche to have been sponsored by Liberty Mutual, indicating the ability of the cat bond market to service the aggregate reinsurance protection needs of major insurers, if the structure and terms are right.
As we reported recently, there is growing evidence that investor appetite for aggregate notes has increased somewhat, albeit only on appropriate terms.
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.
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) ·