Louisiana Citizens top target for Bayou Re cat bond now $220m

Louisiana Citizens Property Insurance Corporation is the latest catastrophe bond sponsor in 2023 to target an enlarged issuance size, with what was a $150 million target for its new Bayou Re Ltd. (Series 2023-1) deal, now lifted to target as much as $220 million in reinsurance from the cat 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, returned to the cat bond market for this Bayou Re 2023-1 issuance back in April.

At the time of the deal’s launch, Artemis reported that LA Citizens was seeking $150 million of named storm reinsurance protection from what will be the ninth catastrophe bond it has sponsored, according to our Deal Directory.

Now, we understand the target size has been increased, while at the same time price guidance has been adjusted for each tranche of notes being issued, one upwards and one down.

This Bayou Re 2023-1 cat bond will protect Louisiana (LA) Citizens with reinsurance from the capital markets against certain named storm losses in its home state, over a three year period, on an indemnity and per-occurrence basis.

When the deal launched, a Class A tranche of notes were sized at $100 million, but we’re now told this has been increased to a $120 million target.

The Class A notes come with an initial expected loss of 2.14% and were first offered with pricing guidance in a range from 13.25% to 14.25%, but this has now been adjusted to an updated spread guidance of from 12.75% to 13.25% we’re told, so it now looks as though this lower-risk tranche of notes will price at the low-end of initial guidance or even below that.

The Class B tranche of notes were originally sized at $50 million, but we’re now told this has been raised, with now between $60 million and $100 million of reinsurance coverage sought.

The Class B tranche of Bayou Re cat bond notes are riskier, with an initial expected loss of 3.09% and these were first offered with spread price guidance in a range from 18.5% to 19.5%, but we’re now told this has been fixed at the upper-end, of 19.5%.

The multiples-at-market continue to look high for this new Bayou Re catastrophe bond, even for the lower-risk Class A notes that saw their pricing guidance tightened and lowered.

We’ll update you when final size and pricing are known.

You can read all about this new Bayou Re Ltd. (Series 2023-1) catastrophe bond and every other cat bond issued in the extensive Artemis Deal Directory.