Florida Citizens lifts Everglades Re II cat bond upper target to $775m

As it seeks to secure its reinsurance needs for the coming wind season in the most economic manner, Florida’s Citizens Property Insurance Corporation has upsized its target for its latest catastrophe bond issuance for a second time, with now up to $775 million of protection sought from the dual-series issuance of Everglades Re II Ltd. (Series 2023-1 & 2023-2) notes.

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

One series of notes on offer 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.

As we reported earlier this week, Florida Citizens target for this cat bond had been lifted considerably, with a possibility it could triple size to $600 million targeted, as the official target range jumped to between $425 million to as much as $600 million.

Now, we’re told the size target has been lifted again.

According to sources, Florida Citizens is now looking to secure between $650 million and $775 million of one-year reinsurance protection with these catastrophe bonds.

So, at a minimum the issuance will now more than triple from Citizens original target, perhaps getting close to a fourfold increase in size.

We’re now told that the Series 2023-1 Class A notes that will provide aggregate reinsurance to the Citizens Coastal Account are sized at between $250 million and $300 million.

The Series 2023-1 Class A notes 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, but that price guidance was narrowed to 88.50% to 88.75% at the last update, and we’re told has now been fixed at 88.625% of principal, a roughly 11.375% rate-on-line or coupon equivalent.

The Series 2023-2 Class A tranche of notes that will provide aggregate reinsurance to the Citizens Personal Lines Account are now sized at between $400 million and $475 million, we understand.

These Series 2023-2 Class A notes have an initial base expected loss of 0.92% and were first offered with price guidance in a range from 89.5% to 90% of the original principal, which later narrowed to 89.75% to 90% and we’re now told have been fixed at 89.875% of principal, a roughly 10.125% rate-on-line or coupon equivalent.

This visit to the catastrophe bond market is now set to be a very strong result for Florida Citizens as it is now set to secure significant capital markets support for its reinsurance arrangements, with pricing within the initial guidance.

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.