NCIUA gets $350m Cape Lookout Re cat bond priced 12% below guidance

The North Carolina Insurance Underwriting Association (NCIUA) has now secured the 75% upsized target of $350 million in named storm reinsurance protection from its new Cape Lookout Re Ltd. (Series 2023-1) catastrophe bond, that has been priced around 12% below the mid-point of initial guidance.

This new issuance is the NCIUA’s fifth catastrophe bond under its Cape Lookout Re Ltd. program of deals.

Back in March, the NCIUA, a property insurer of last resort for North Carolina, returned to the cat bond market with this Cape Lookout Re 2023-1 deal, seeking an initial target of $200 million or more in multi-year named storm reinsurance protection.

Thanks to the currently very positive issuance conditions in the catastrophe bond market, the NCIUA lifted its target for the deal to $350 million, as we reported in an update last week.

Now, we can report, that this 75% upsized target has now been secured, while the notes have been attractively priced for the sponsor.

So, the North Carolina Insurance Underwriting Association (NCIUA) will secure $350 million of capital markets backed indemnity and annual aggregate reinsurance protection against named storm losses in its home state, to run across a three year term.

As well as taking advantage of cat bond investor appetite to secure much more in reinsurance protection,the NCIUA has also secured a roughly 12% reduction in the price it will pay for the coverage.

The Series 2023-1 Class A notes have an initial expected loss of 1.37%. They were first offered to cat bond investors with price guidance in a range from 7% to 7.75%, which was subsequently lowered and narrowed to a range of 6.5% to 7%.

We’re now told that the $350 million of Series 2023-1 Class A notes that Cape Lookout Re Ltd. is set to issue for the NCIUA will pay investors a spread of 6.5%, so the low-end of reduced guidance and representing a roughly 12% drop from the initial guidance mid-point.

That is a strong result for the NCIUA from its latest catastrophe bond sponsorship.

With its $250 million Cape Lookout Re Ltd. (Series 2021-1) cat bond and $330 million Cape Lookout Re Ltd. (Series 2022-1) cat bond still both in-force, the NCIUA will now have $930 million of reinsurance protection provided by the cat bond market, with staggered maturities over the coming years.

That’s an effective way to bring the capital markets into its reinsurance tower, something the NCIUA has actually been doing since as far back as 2009, as the insurer of last resort had previously sponsored cat bonds alongside the North Carolina Joint Underwriting Association. Details of those found cat bonds issued between 2009 and 2013 can also be found here.

You can read all about this new Cape Lookout Re Ltd. (Series 2023-1) transaction and every other cat bond ever issued in our Artemis Deal Directory.