Massachusetts MPIUA targets $100m Mayflower Re 2024 multi-peril cat bond

The Massachusetts Property Insurance Underwriting Association (MPIUA) is back in the catastrophe bond market seeking a $100 million or greater amount of catastrophe reinsurance protection from a Mayflower Re Ltd. (Series 2024-1) transaction.

This will be the fifth catastrophe bond sponsored by the Massachusetts Property Insurance Underwriting Association (MPIUA), which is a residual market property insurance association, or FAIR Plan, for the Commonwealth of Massachusetts.

A year ago, the residual market insurer secured $175 million in multi-peril catastrophe reinsurance protection from a Mayflower Re Ltd. (Series 2023-1) catastrophe bonb, which was its first since 2017.

So, it’s encouraging to see the MPIUA back just one year later to add more catastrophe bond cover to its reinsurance program.

Using Bermuda-based vehicle Mayflower Re Ltd. again, the MPIUA’s 2024 catastrophe bond will feature a single tranche of notes that will be sold to investors, with the proceeds used to collateralize retrocessional reinsurance agreements with global reinsurer Hannover Re, which is acting as the fronting risk transformer for this cat bond.

As a result of which, Hannover Re will in turn be able to provide the catastrophe reinsurance to the MPIUA.

This Mayflower Re Series 2024-1 cat bond will provide the MPIUA with a source of indemnity based and annual aggregate reinsurance over a three-year term, running until the end of June 2027, we’re told.

The currently $100 million of Class A notes will cover losses from Massachusetts named storm, severe thunderstorm and winter storm events, the same range of perils covered by previous cat bonds that benefited the MPIUA, issued in 2015, 2017 and 2023.

To qualify under the terms of the cat bond, an event must breach a $10 million ultimate net loss deductible, we understand.

The Class A tranche of notes are preliminarily sized at $100 million and would cover losses from an attachment point of $1.25 billion, exhausting at $1.75 billion of losses to the MPIUA risk pool, sources have said.

Which gives the Mayflower Re Series 2024-1 Class A notes an initial attachment probability of 1.267%, an initial base expected loss of 1.059% and these notes are being marketed to investors with spread price guidance in a range from 4% to 4.5%.

We can compare that to the Mayflower Re 2023 cat bond, whose Class A notes had an initial expected loss of 1.084% and priced to pay investors a spread of 4.5%.

For 2024, we’re told the new Mayflower Re cat bond will sit highest up in the MPIUA’s reinsurance tower, with the two tranches of the 2023 issuance stacked beneath it and each layer shared with traditional sources of protection.

The Massachusetts MPIUA is another residual market insurer that is bringing catastrophe bonds more deeply into its reinsurance tower after a few years away from the market, which is an encouraging trend being supportive of continued market growth.

You can read all about this new Mayflower Re Ltd. (Series 2024-1) catastrophe bond and every other cat bond transaction issued since the market began in the Artemis Deal Directory.