Vermont Mutual Insurance Company is back in the catastrophe bond market for the third time, looking to sponsor a $200 million or larger Baldwin Re Ltd. (Series 2025-1) issuance, which would become its largest cat bond yet, targeting an expansion of its capital markets backed reinsurance to cover losses in north east US states.
The insurer sponsored its debut cat bond in 2021, securing $150 million in multi-peril reinsurance across a four year term with the Baldwin Re 2021-1 deal.
That first cat bond for Vermont Mutual matures this June, as a result this new issuance appears a renewal and attempted upsizing of the reinsurance coverage it provided.
The insurer then returned in 2023 and sponsored a $100 million Baldwin Re Ltd. (Series 2023-1) cat bond, which added to its capital markets backed reinsurance and remains in-force until mid-year 2027.
Read about all of the Vermont Mutual sponsored catastrophe bonds in our Deal Directory by filtering the list by sponsor.
Once again, this third catastrophe bond from the company is substantially similar to the first two, in covering the same regions and perils.
Bermuda based special purpose insurer Baldwin Re Ltd. will issue a single tranche of Series 2025-1 Class A notes, that will be sold to investors and the proceeds used to collateralize a reinsurance agreement covering the sponsor Vermont Mutual, as well as its named affiliates Northern Security Insurance Company, Inc. and Granite Insurance Company, we understand.
With an initial target to secure $200 million of reinsurance this will become the largest cat bond for the company and like the others it will provide Vermont Mutual Insurance and subsidiaries with four years of catastrophe reinsurance to the end of June 2029, on an indemnity and per-occurrence basis.
The covered perils are the same as the 2023 deal, being US Northeast, named storm, earthquake, severe weather, and fire, while the covered area is also the same, being Connecticut, Maine, Massachusetts, New Hampshire, New York, Rhode Island and Vermont.
We’re told the currently $200 million of Series 2025-1 Class A notes that Baldwin Re Ltd. is set to issue would attach their coverage at $500 million of losses to Vermont Mutual, covering a share up to exhaustion at $1 billion.
As a result, the notes come with an initial attachment probability of 1.453%, an initial base expected loss of 1.1% and they are being offered to investors with pricing guidance for a spread of between 3.75% and 4.25%, sources said.
For comparison, the 2023 cat bond had an initial base expected loss of 1.203% and priced for a spread of 4.5%, while the 2021 cat bond came with an initial expected loss of 0.91% and priced at 2.25%.
So, with a projected multiple-at-market of around 3.64 times the expected loss with the 2025 notes, at the mid-point, that compares to a multiple of 3.74 times EL for the 2023 notes, and 2.47 times EL for the 2021 vintage.
You can read all about this new Baldwin Re Ltd. (Series 2025-1) catastrophe bond and every other cat bond deal in our extensive Artemis Deal Directory.
