Insurance giant Liberty Mutual is returning to the catastrophe bond market seeking a source of catastrophe reinsurance triggered by losses of $250 million or more in the capital markets through a Mystic Re IV Ltd. (Series 2024-1) emission.
This will be the ninth catastrophe bond in the Mystic Re series that Liberty Mutual has sponsored and the first to feature an industry loss index trigger since its issuance of Mystic Re IV 2021-1 catastrophe bonds in December 2020 .
Over the years, Liberty Mutual has used both industry loss and indemnity triggers as it sources catastrophe reinsurance and retrocessional protection to cover its peak risk exposures from capital markets investors.
The company’s last two catastrophe bonds were both indemnity-based, but this agreement sees the company returning to using an industry-weighted loss trigger to provide the protection it needs.
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Through its Bermuda-based special purpose insurer (SPI), Mystic Re IV Ltd., we are told that Liberty Mutual is sponsoring the issuance of a single tranche of Series 2024-1 Class A notes, designed to provide the Company with at least $250 million in guaranteed reinsurance protection per event and based on industry-weighted loss triggers.
The notes will provide coverage to Liberty Mutual and all its affiliates, including its syndicate at Lloyd’s, for a period of three calendar years, beginning January 1, 2024, we are told.
The Mystic Re IV 2023-1 cat bond will provide Liberty Mutual with reinsurance against losses due to named storms and earthquakes affecting parts of the United States, Canada and the Caribbean, reportedly.
We’re told that named storm coverage applies to the United States, Washington DC, Puerto Rico and the Virgin Islands, while earthquake coverage also applies to Canada.
The $250 million Series 2024-1 Class A Notes will have an initial pricing probability of 7.21%, an initial modeled expected loss of 5.03% and we are told they have price predictions in a range of 12.25% to 13%.
We’re told that if pricing is favorable, Liberty Mutual has ample room to increase the size of this new Mystic Re IV 2024-1 catalytic bond, if it chooses.