Liberty Mutual raises $325 million through the Mystic Re IV catastrophe bond at a lower price.

Liberty Mutual has successfully secured the increased target of $325 million of fully collateralized reinsurance protection through its new Mystic Re IV Ltd. (Series 2025-1) catastrophe bond. The insurer capitalized on strong investor demand and effective cat bond execution to price the deal largely below initial expectations.

Liberty Mutual Insurance returned to the cat bond market in November, initially aiming to secure at least $225 million of indemnity-based catastrophe reinsurance protection from capital markets through the Mystic Re IV 2025-1 cat bond deal. Once finalized, this will be the tenth cat bond in the Mystic Re series that we have analyzed and included in our Deal Directory.

At launch to investors, only two tranches of per-occurrence notes were given size guidance, while the market appetite for an annual aggregate layer was still being evaluated. In an initial update, the annual aggregate tranche of notes also received a size target, raising the total offering to $325 million, with pricing slightly adjusted downward. In a subsequent update, we learned that the size target remained unchanged, but price guidance for two of the offered tranches had been further reduced, indicating even stronger execution for the sponsor.

Now, sources have confirmed that all three tranches of Series 2025-1 notes issued by Mystic Re IV Ltd. have been successfully priced to meet the increased target for $325 million of reinsurance. The pricing was largely below the initially marketed ranges.

As a result, with the new cat bond now priced, Liberty Mutual has secured $325 million of multi-peril collateralized reinsurance cover on both a per-occurrence and annual aggregate indemnity trigger basis from the capital markets for a three-calendar-year term starting January 1st, 2025. This Mystic Re IV 2025-1 cat bond provides reinsurance protection against losses from named storms and earthquakes on an indemnity basis across the first two tranches of notes, and these perils plus severe weather and wildfires from a third annual aggregate tranche of notes. The covered area includes parts of the US, Canada, and the Caribbean.

A Class A tranche of notes provides $125 million of indemnity per-occurrence reinsurance with an initial expected loss of 1.41%. They were first offered with spread price guidance in a range from 4.5% to 5%, which was later adjusted to between 4% and 4.5%, and then fixed at a 4% spread.

A Class B tranche offers $100 million of indemnity per-occurrence reinsurance cover, with an initial expected loss of 5.16%. First offered with a spread price range from 11% to 11.75%, the guidance was revised down to between 10.5% and 11%, and then further reduced to 10.25% to 10.5%, with pricing fixed at 10.25%.

The Class C tranche provides $100 million of indemnity annual aggregate reinsurance protection, with an initial expected loss of 4.06%. Initially offered with spread price guidance from 13.5% to 14.5%, it was fixed at 14%, and the risk interest spread was priced accordingly.

This is the first aggregate cat bond tranche sponsored by Liberty Mutual, reflecting the growing ability of the cat bond market to meet the aggregate reinsurance protection needs of major insurers when the structure and terms are right. Recent reports indicate that investor appetite for aggregate notes has increased somewhat, although only on appropriate terms.

For more details on each catastrophe bond sponsored by Liberty Mutual, view our Deal Directory, where you can filter results by trigger type and other features. You can read more about this Mystic Re IV Ltd. (Series 2025-1) catastrophe bond from Liberty Mutual and all other cat bonds issued in the Artemis Deal Directory.

Liberty Mutual has now secured the upsized target of $325 million of fully collateralized reinsurance protection through its new Mystic Re IV Ltd. (Series 2025-1) catastrophe bond, while the insurer benefited from high investor demand and strong cat bond execution to price the deal largely below initial guidance.

Liberty Mutual Insurance came back to the cat bond market 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.

Once settled, 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 launch to investors, only two tranches of per-occurrence notes had been given size guidance while market appetite for an annual aggregate layer was still being assessed.