American Integrity to price new Integrity Re 2024-1 cat bond at upsized $305m

American Integrity Insurance Company is now set to secure the upsized target of $305 million in collateralized named storm reinsurance protection from its new Integrity Re Ltd. (Series 2024-1) catastrophe bond, while two tranches of notes from the issuance are set to price below guidance.

American Integrity came back to the catastrophe bond market earlier in February, aiming to secure at least $150 million in collateralized named storm reinsurance protection for its hurricane exposures across three southeastern US states.

As we then reported earlier this week, the target size of the issuance was raised to at least $295 million, while the price guidance was lowered across most tranches of the cat bond deal.

Later that same day we learned that the target size of this cat bond issuance had been increased further, with $305 million of named storm reinsurance then being sought by American Integrity.

Now, sources have told us that the $305 million target has been secured, meaning American Integrity has successfully more than doubled the size of its new catastrophe bond, from its original $150 million target.

Full details of this and every cat bond sponsored by American Integrity can be found in our Deal Directory.

It means that American Integrity will now benefit from $305 million of indemnity based named storm reinsurance protection, across the covered states of Florida, Georgia and South Carolina, over two risk periods, coming on risk from June 2024, with the coverage running to the end of May 2026.

Four tranches of notes are soon to be issued, the first of which will provide annual aggregate reinsurance and the next three will provide per-occurrence reinsurance that would cascade down after events erode lower layers of the insurers’ reinsurance tower, such as its FHCF coverage.

The aggregate layer of notes from this cat bond deal, the Class A notes, had been originally targeted to be $50 million in size, but these are now confirmed to have more than doubled to $120 million, to cover the full layer of the aggregate risk tower for American Integrity.

That’s important to note the improving appetite for aggregate risks in the cat bond market, where transactions are being offered with more sensible attachments, deductibles and event caps, as this one has been (full details in the Deal Directory entry).

The $120 million of aggregate Class A notes come with an initial expected loss of 0.22% and were first marketed with spread guidance in a range from 12% to 13%, which was later reduced to between 11% and 12%, then lowered again and narrowed to between 10.5% and 11%, and we’re now told the notes will price to pay a spread of 10.5%, so the bottom of twice reduced guidance.

The Class B tranche of notes remained at $50 million in size and will provide per-occurrence protection, with an initial expected loss of 2.35%. These notes were first offered with spread guidance in a range from 14% to 15%, which was then reduced to 13.5% to 14%, then reduced again to 13.25% to 13.5% and are now set to price at the bottom of the twice reduced range at 13.25%, we understand.

The Class C tranche of notes will settle at $60 million in size. These also provide per-occurrence protection, with an initial expected loss of 2.38% and were priced at the 17% level they were given at the first deal update we learned of.

The final tranche of Class D notes were originally positioned to be $50 million in size, but have now been confirmed to have upsized to $75 million. They have an initial expected loss of 3.56% and were first offered with spread guidance in a range from 22% to 23%, which was later narrowed to a new range of 22.5% to 23% and has now been fixed at the 23% upper-end of initial guidance.

Overall, this is a strong result for American Integrity, especially with the market anticipating growing recoveries from the firm’s older catastrophe bond issues due to its rising losses from hurricane Ian.

The appetite shown for this cat bond perhaps also reflects the higher spreads on offer from it, with some investors being attracted to higher-return opportunities.

You can read all about this new Integrity Re Ltd. (Series 2024-1) catastrophe bond and every cat bond deal in the Artemis Deal Directory.