Vermont Mutual’s Baldwin Re cat bond price drops to low-end of guidance

Vermont Mutual Insurance Company looks set to secure its latest catastrophe bond at reduced pricing, as the spread for the new $100 million Baldwin Re Ltd. (Series 2023-1) cat bond issuance has now been reduced to the low-end of initial guidance.

Vermont Mutual is still on-target to secure $100 million in multi-year collateralized reinsurance from the Baldwin Re 2023-1 cat bond deal, which will provide it with cover against losses from multi-peril events in north east US states.

Vermont Mutual Insurance is one of the oldest property and casualty insurers in the United States having been established in 1828 and this is its second catastrophe bond, having previously secured $150 million in multi-peril reinsurance across a four year term with the Baldwin Re 2021-1 deal.

Baldwin Re Ltd. will issue a single $100 million tranche of Series 2023-1 Class A notes, to provide Vermont Mutual Insurance and subsidiaries with four years of catastrophe reinsurance to the end of June 2027, on an indemnity and per-occurrence basis, across covered perils of US Northeast, named storm, earthquake, severe weather, and fire.

The covered area is Connecticut, Maine, Massachusetts, New Hampshire, New York, Rhode Island and also Vermont.

The issuance remains at the $100 million it was initially targeting, we under stand, but the price has now fallen.

The $100 million Series 2023-1 Class A notes that Baldwin Re will issue have an initial base expected loss of 1.203% and were at first offered to investors with pricing guidance for a spread of between 4.5% and 5.25%.

We’re now told that the price guidance has been lowered to the bottom-end of 4.5% and while not yet finalised, pricing is later this week, we’re told there is now unlikely to be any chance.

At that level the notes will pay investors a multiple of below four times the expected loss, but for a Northeast peril cat bond that is actually fairly typical of other deals in recent months.

You can read all about this new Baldwin Re Ltd. (Series 2023-1) catastrophe bond and every other cat bond deal in our extensive Artemis Deal Directory.