Citizens secures Lightning Re industry loss cat bond at $500m with 11% spread

Florida’s Citizens Property Insurance Corporation has now finalised the pricing on its first industry loss trigger catastrophe bond and the Lightning Re Ltd. (Series 2023-1) issuance has secured the insurer $500 million of capital markets backed reinsurance at an 11% risk interest spread.

Florida Citizens returned to the cat bond market recently with its tenth full 144a catastrophe bond, but the first it has sponsored structured to use an industry-loss trigger.

At its launch to investors, the Lightning Re Ltd. cat bond was seeking $200 million of capital markets backed reinsurance protection on a PCS industry loss index and annual aggregate trigger basis for Florida Citizens.

As we later reported, strong investor appetite, as well as Citizens desire and need for more reinsurance, saw the targeted size of this first Lightning Re cat bond at least double, with between $400 million and $500 million of cover then sought from the issuance.

As we reported this morning, Florida Citizens board approved the spend necessary to proceed with the issuance of the Lightning Re cat bond late on Friday of last week.

That spend is expected to be around $61 million in year-one, then $52 million in subsequent years.

Now, sources have told Artemis that the Lightning Re catastrophe bond has been successfully priced and Florida Citizens has achieved this at the upper-end target for $500 million of reinsurance coverage, some 150% larger than the initial deal target size.

At the same time, the risk interest spread for the Lightning Re cat bond notes has been priced at 11%, which is just over 9% lower than the mid-point of initial guidance, that price guidance having been 11.5% to 12.5% at the deal’s launch to investors.

With the now $500 million of Lightning Re Series 2023-1 Class A catastrophe bond notes having an initial base expected loss of 1.8%, that means the cat bond will pay investors a multiple-at-market of around 6.1 times the initial expected loss.

It’s good to see Florida Citizens getting this multi-year industry loss cover through, which will assist the insurer as it brings together its three reinsurance towers into one in the coming year, providing a valuable source of cover that will work for the insurer both before and after the merging of its accounts.

You can read all about the Lightning Re Ltd. (Series 2023-1) industry loss catastrophe bond that is being sponsored by Florida’s Citizens Property Insurance Corporation and view details of more than 900 cat bonds in the extensive Artemis Deal Directory.