Louisiana Citizens returns for $225m Bayou Re 2024-1 catastrophe bond

Louisiana Citizens Property Insurance Corporation, the non-profit residential and commercial property insurer for those who cannot access private market insurance in the state, has returned to the catastrophe bond market aiming to secure $225 million of collateralized named storm reinsurance through a Bayou Re Ltd. (Series 2024-1) issuance.

This will be the tenth catastrophe bond sponsored by Louisiana Citizens we now have listed in our Deal Directory.

It’s the second under the Bayou Re Ltd. special purpose insurer (SPI) from Bermuda and sees Louisiana Citizens aiming to further build-out its multi-year hurricane and named storm reinsurance protection with the support of global capital markets.

The initial target is to secure $225 million of Louisiana named storm reinsurance protection for the residual market insurer of the state, Artemis has learned.

Two tranches of Series 2024-1 cat bond notes will be issued by Bayou Re Ltd. and sold to investors, with the proceeds used to collateralize the reinsurance agreement between the SPI issuer and Louisiana Citizens.

The reinsurance coverage from these Bayou Re 2024-1 cat bond notes will protect Louisiana Citizens against named storm losses on an indemnity trigger and per-occurrence basis, across a three-year term, we understand.

A currently $150 million Class A tranche of notes would attach their coverage at $1.33 billion of losses to Louisiana Citizens, exhausting at $2 billion.

As a result the Class A notes have an initial attachment probability of 1.47%, an initial expected loss of 1.14% and are being offered to investors with spread price guidance of 9.5% to 10.5%, we are told.

A currently $75 million Class B tranche are riskier, having an attachment point at $500 million of losses and exhausting their coverage at $800 million.

Which gives the Class B notes an initial attachment probability of 4.09%, an initial expected loss of 3.19% and they come with spread price guidance of 19% to 20%.

For comparison, the Series 2024-1 Class B notes will sit in the Louisiana Citizens reinsurance tower alongside the Series 2023-1 Class B notes from a year ago, which had an initial expected loss of 3.09% and priced for a spread of 19.5% at issuance.

So, currently they are priced in-line with the cat bond issued a year ago, so it will be interesting to see where these new notes settle, as they offer a chance for a very close comparison to see how price has moved in the last twelve months.

Louisiana Citizens is another residual market insurer who’s exposure has grown and so requires increasingly levels of reinsurance, so it is encouraging to see catastrophe bonds remaining central to this for the insurer.

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