NCIUA lifts Cape Lookout Re cat bond target to $350m

The North Carolina Insurance Underwriting Association (NCIUA) has raised its target for its latest catastrophe bond, with now $350 million of named storm reinsurance protection sought from the capital markets through this Cape Lookout Re Ltd. (Series 2023-1) transaction.

This new issuance will be the NCIUA’s fifth cat bond under the Cape Lookout Re Ltd. program of deals.

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

Thanks to positive conditions in the catastrophe bond market, we now understand that the size target for this new cat bond for the NCIUA has been lifted to $350 million.

As a result, Cape Lookout Re Ltd. will now issue a $350 million tranche of Series 2023-1 Class A notes, that will ultimately provide the North Carolina Insurance Underwriting Association (NCIUA) with a capital markets backed source of indemnity and annual aggregate reinsurance protection against named storm losses in its state, over a three year term.

At the same time as looking set to increase in size significantly, we’re also told the NCIUA’s new cat bond is likely to price at the bottom or below the initial spread guidance.

The Series 2023-1 Class A notes, that have an initial expected loss of 1.37%, were first offered with price guidance in a range from 7% to 7.75%, but we’re now told the guidance has been lowered and narrowed to a range of 6.5% to 7%.

Meaning the NCIUA’s new Cape Lookout Re cat bond will become another to grow in size, while pricing lower than initial guidance suggested, following the trend of recent weeks.

With almost every new cat bond increasing in size to deliver more reinsurance to their sponsors, issuance is starting to soak up new capital that has flowed in.

The question going forward will be whether issuance will keep up with the significant maturities that are coming this quarter as well, especially if cat bond fund managers continue to raise new capital. To achieve that, we should see a significant number of new issuances emerge over the coming weeks.

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.