CEA gets $650m of reinsurance from Ursa Re 2023-3 cat bond
The California Earthquake Authority (CEA) has now finalised its latest Ursa Re Ltd. (Series 2023-3) catastrophe bond, securing $650 million of reinsurance protection from the deal at pricing, which is a 62.5% increase on its initial target.
At launch to investors, the CEA had a target for $400 million of California earthquake reinsurance from this Ursa Re Ltd. Series 2023-3 cat bond issuance.
Now, we understand the residual market insurer has secured $650 million in collateralized earthquake reinsurance protection from this new catastrophe bond deal, a 62.5% increase, with the protection afforded on an indemnity and annual aggregate basis, to run across a three year term to the end of November 2026.
It’s not quite the full amount that was sought after the first update, when the CEA lifted its target for the Ursa Re 2023-3 cat bond to source up to $675 million of collateralized reinsurance from the ILS market.
But, it’s still a good result for the insurer, which remains price conscious as the buyer of one of the largest reinsurance towers in the world.
The Class AA tranche of notes that began at $225 million in size, but whose target was then lifted to between $275 million and $325 million, have now been priced to provide $300 million of protection to the CEA, we’re told.
With an initial expected loss of 1.05%, the AA notes were first offered to investors with price guidance in a range from 5% to 5.5%, but the spread has now been priced at the upper-end of 5.5%, we understand.
The Class D tranche of notes were originally $175 million in size, but the CEA’s target for this layer then increased to between $300 million and $350 million of cover and we’re now told the upper-end target was achieved, with $350 million of Class D notes now set to be issued.
With their initial expected loss of 2.68%, the Class D notes were first offered to investors with price guidance in a range from 8% to 8.75%, and like the AA’s the spread was eventually priced at the top-end of 8.75%, we’ve learned.
It’s good to see the CEA finding cat bond market pricing conducive enough to upsize its latest issuance significantly, even though not quite achieving the upper-end size target.
The CEA is an extremely price-conscious and strategic buyer of reinsurance and while its cat bond program is set to shrink a little, given it has some $775 million of cat bonds maturing around this time, it looks as if the cat bond market will remain a really significant provider of reinsurance to the insurer.
You can read all about this new Ursa Re Ltd. (Series 2023-3) catastrophe bond from the California Earthquake Authority (CEA) and every other cat bond ever issued in the extensive Artemis Deal Directory.
