The maturity dates for each tranches of Safepoint Insurance coverage Firm’s most just lately sponsored disaster bond, the $40 million Manatee Re III Pte. Ltd. (Sequence 2019-1) transaction, have now been prolonged as claims improvement continues, we perceive.
The 2 tranches of the Manatee Re III disaster bond had beforehand been marked down considerably within the secondary cat bond market, due to the understanding they confronted potential losses of principal after the affect of hurricane Ida in September 2021.
Safepoint’s two tranches of Manatee Re III cat bond notes present it with collateralised reinsurance cowl towards losses from US named storms and extreme thunderstorms throughout the states of Florida, Louisiana, New Jersey & Texas.
Following the landfall of hurricane Ida in Louisiana in the beginning of September final 12 months, each tranches of notes had been marked down within the secondary market as one of many uncovered bonds seen most at-risk of losses.
Each of the tranches of notes have been solely marked down round 20% to start, implying uncertainty within the cat bond market over how important any reinsurance restoration Safepoint would make could possibly be from hurricane Ida.
However by mid-November, as we reported on the time, it grew to become clear that the market had lifted its expectations of losses to the Manatee Re III cat bonds, with one tranche marked down as more likely to face a complete loss, the riskier Class B notes, whereas the opposite Class A tranche was marked down for losses of 75% to 85% of principal.
To be trustworthy, not a lot has modified since then and proper now, the most recent cat bond dealer pricing we’ve seen nonetheless has the Class A tranche marked at between 15 and 25 cents on the greenback, whereas the riskier Class B notes are marked down at 1 or 2 cents and have even been faraway from pricing sheets by some dealer sellers (a transparent signal this tranche can pay out in full).
However each tranches have been attributable to mature in early July 2022 and it appears there gained’t be a decision of the ultimate lack of principal earlier than that, so now we’re informed the maturity date has been prolonged by nearly 4 years, from July seventh 2022 to now stand at June eighth 2026.
That’s a very lengthy extension of maturity, which may suggest the Class A notes will take a protracted whereas to see any loss finalised.
As a reminder, each tranches of notes issued beneath the Manatee Re III cat bond present Safepoint with $20 million every of per-occurrence indemnity reinsurance safety.
The much less dangerous Class A notes have an anticipated lack of 1.15%, whereas the Class B layer had an preliminary anticipated lack of 4.23% at issuance.
It nonetheless appears like the vast majority of the $40 million of principal can be recovered by Safepoint beneath its reinsurance settlement, with doubtless the total $20 million of the Class B layer set to be recovered, or maybe even already having been recovered by the insurer.
The Class A notes stay much less sure, as with secondary marks suggesting a between 75% and 85% lack of principal at present, Safepoint might wait out additional claims improvement from hurricane Ida to see if that will increase. Therefore the lengthy extension of maturity could possibly be a wise transfer for the sponsor.