Florida Citizens could triple Everglades Re II cat bond issuance to $600m

Florida’s Citizens Property Insurance Corporation is looking to upsize its latest catastrophe bond issuance significantly, with now up to $600 million of one-year collateralized reinsurance sought from the dual-series issuance of Everglades Re II Ltd. (Series 2023-1 & 2023-2) notes.

Florida Citizens returned to the catastrophe bond market in late April, with a $200 million target for reinsurance protection across the dual-series of Everglades Re II Ltd. notes being offered on a zero-coupon discount note basis.

One series of notes will cover the Florida Citizens Coastal Account, the other its Personal Lines Account, with each set to provide named storm reinsurance on an aggregate basis across just a single wind season.

The reason for the single wind season term of this issuance, is that Florida Citizens is set to merge its three accounts (Coastal Account, Personal Lines Account and Commercial Lines Account) into a single Citizens Account, effectively transitioning its reinsurance structure from three towers into one for future years.

We’re told now that Citizens is looking to significantly upsize the amount of reinsurance protection this new Everglades cat bond will provide, at a minimum more than doubling it, but possibly tripling it, with from $425 million to as much as $600 million now being sought.

The Series 2023-1 Class A tranche of notes began at $100 million but are now being offered at between $175 million and $250 million, we’re told.

The Series 2023-1 Class A notes will provide aggregate reinsurance to the Citizens Coastal Account, have an initial base expected loss of 1.59% and were first offered with price guidance in a range from 88.25% to 88.75% of the original principal (a rough 11.25% to 11.75% equivalent to a rate-on-line or coupon).

We’re now told that the Series 2023-1 Class A notes price guidance has been narrowed to 88.50% to 88.75% (a rough 11.25% to 11.5% spread range).

The Series 2023-2 Class A tranche of notes were also originally sized at $100 million, but we understand this to have been lifted to between $250 million and $350 million.

The Series 2023-2 Class A notes will provide aggregate reinsurance to the Citizens Personal Lines Account and have an initial base expected loss of 0.92%. These notes were first offered with price guidance in a range from 89.5% to 90% of the original principal (a rough 10% to 10.5% equivalent to a rate-on-line or coupon).

Sources said the Series 2023-2 Class A notes price guidance has also been narrowed to 89.75% to 90% (a rough 10% to 10.25% equivalent to a rate-on-line or coupon).

So both series of notes are set to upsize, while their pricing has narrowed to the lower-end of the guidance ranges on offer.

As a reminder, earlier this year Florida Citizens had already secured $500 million of multi-year industry-loss triggered reinsurance from the capital markets through a Lightning Re Ltd. (Series 2023-1) catastrophe bond issuance.

You can read all about these new Everglades Re II Ltd. (Series 2023-1 & 2023-2) catastrophe bonds that are being sponsored by Florida’s Citizens Property Insurance Corporation and view details of more than 900 other cat bond issuances in the extensive Artemis Deal Directory.