Swiss Re, a prominent global reinsurer, is reportedly nearing the finalization of pricing for its ongoing $75 million Matterhorn Re Ltd. (Series 2025-3) catastrophe bond. This transaction, which offers protection against North American earthquake risks, is expected to see its pricing reduced, aligning with a broader market trend observed in recent months.
This particular issuance marks the fourteenth under Swiss Re's Bermuda-based Matterhorn Re program and its third within the current year. Despite the adjustments in pricing, the targeted size for this new cat bond remains at $75 million. The bond is structured with two tranches of Series 2025-3 notes, providing aggregate retrocessional coverage for North American earthquakes across the United States (excluding Hawaii), Washington D.C., and Canada, over a three-year period.
The Class A notes, valued at $50 million with an initial expected loss of 0.97%, were initially offered with a price guidance between 2.75% and 3.75%. This has now been updated to a lower range of 2.5% to 2.75%. Similarly, the riskier $25 million Class B notes, with an initial expected loss of 2%, saw their guidance decrease from an initial range of 4% to 4.5% to a revised 3.75% to 4%. These reductions indicate Swiss Re's focus on achieving favorable pricing, securing crucial earthquake retrocessional protection from the capital markets.
This strategic move by Swiss Re to lower the pricing for its catastrophe bond demonstrates a flexible approach to capital market engagement. By adapting to market conditions and prioritizing cost-efficiency, the company not only secures essential risk transfer capacity but also showcases the dynamic nature of the insurance-linked securities market. Such adjustments benefit both the issuer by optimizing capital deployment and investors by offering competitive returns, contributing to a more resilient and adaptable global financial landscape.
