Liberty Mutual in $100m Limestone Re 2020-2 reinsurance sidecar issuance

U.S. primary insurer and global re/insurer Liberty Mutual has successfully closed on another collateralised reinsurance sidecar placement for 2020, with a $100 million of notes issued by its Limestone Re Ltd. sidecar.

Liberty Mutual has been accessing the appetite of insurance-linked securities (ILS) funds and capital market investors to support its growing Limestone Re Ltd. collateralised sidecar series, as a way to source diversified reinsurance capital and also share its underwritten risks with investors.

The re/insurer has returned regularly each year with transactions since launching Limestone Re back at the end of 2016 with a first $160 million deal that ceded a mix of U.S. property catastrophe, U.S. homeowners and London Market specialty insurance business to ILS investors.

As Liberty Mutual has sought to bring increasing capital from insurance-linked securities (ILS) investors into its structure, as reinsurance or loss bearing capacity, but also as growth capacity for catastrophe exposed risks as well, the company has returned with Limestone Re sidecar transactions both at the January and mid-year renewals each year.

In 2020 so far, we’ve only been able to report on a $50 million Limestone Re 2020-1 issuance that Liberty Mutual sponsored for the January renewals so far.

That was a particularly small transaction for Limestone Re, but then the sidecar market has been challenged in recent years by significant catastrophe losses and issues related to trapped capital.

In 2019, Limestone Re issued a $240 million deal, featuring both listed and privately placed reinsurance sidecar notes last July.

While in January 2019 Liberty Mutual completed its third reinsurance sidecar transaction through its Limestone Re Ltd. vehicle, with a $150 million arrangement that was largely privately placed.

The issues related to consecutive years of catastrophe losses and trapping of collateral has affected the ability of some sidecars to raise capital through 2020 so far, which has likely affected the size of the Limestone Re issues from Liberty Mutual as well.

With this latest issuance to emerge, Liberty Mutual has sponsored the issuance of two tranches of notes totalling $100 million through the sidecar.

Limestone Re Ltd. has issued a $52.161 million tranche of Series 2020-2 Class A notes and a $47.839 million tranche of Series 2020-2 Class B notes, both of which have been admitted for listing on the Bermuda Stock Exchange (BSX) as insurance related securities, with both tranches of notes due October 1st 2024.

Liberty Mutual does tend to adjust the profile of the risks ceded with each of its Limestone Re sidecar transactions, as it establishes the most attractive routes to cede its business alongside the purchasing of its reinsurance program.

We assume this latest deal covers U.S. and global catastrophe and property insurance or reinsurance business that has been ceded to third-party investors, but specifics are not available at this time.

Of course, the $100 million of listed reinsurance sidecar notes may not be all of this Limestone Re issuance from Liberty Mutual, as it is known to enter into privately placed reinsurance sidecar layer issuances through the vehicle as well.

So there could be more capacity secured at the mid-year renewals through this latest capital markets deal from the insurer than we’re currently aware of.

For details of many reinsurance sidecar investments and transactions over the history of the ILS market, view our comprehensive list of collateralized reinsurance sidecars transactions.