Progressive’s ARX Holding seeks second Bonanza Re cat bond of 2023

ARX Holding, the Progressive-owned parent of American Strategic Insurance Group, is back in the catastrophe bond market for its second issuance of 2023, seeking a $50 million or larger single-year source of additional multi-peril catastrophe reinsurance from a Bonanza Re Ltd. (Series 2023-2) transaction.

For the start of 2023, the insurance group had secured $135 million of collateralized catastrophe reinsurance from a Bonanza Re 2023-1 catastrophe bond deal that spanned a three-year term to the end of 2025.

With its second Series 2023 issuance, ARX Holdings is targeting just a single-year of protection to run through 2024, but for a riskier layer of its reinsurance tower as it looks to source cat bond reinsurance coverage lower down.

This will be the seventh catastrophe bond in the Bonanza Re Ltd. series of deals that at first covered the risks of American Strategic Insurance Group, but in recent year’s have expanded to include others of the carriers of the Progressive-owned ARX Holding Corporation. Details on all of these can be found in our Deal Directory.

It is actually be the eighth catastrophe bond to provide reinsurance to insurer American Strategic, as the company had sponsored the fated Gator Re Ltd. deal back in 2014.

With this new Series 2023-2 cat bond, Bermuda domiciled special purpose insurer Bonanza Re Ltd. will issue a single tranche of zero-coupon notes to provide collateralized reinsurance for the Progressive insurance companies (we understand known as Progressive Home).

The issuance is targeted at $50 million in size, we’re told, to provide a source of indemnity based annual aggregate reinsurance to the sponsor, against losses from the perils of US named storms, earthquakes, severe thunderstorms, winter storm, and wildfires.

We’re told the notes have a two section approach to coverage, with an attachment at $425 million for named storm events and $525 million for all other perils, which perhaps also helps this serve as a peak peril cover with more utility for ARX Holdings and the Progressive Home companies. The notes will cover the ARX Holding insurers, including American Strategic.

The $50 million tranche of Class A zero-coupon notes come with an initial attachment probability of 3.3%, an initial expected loss of 2.28%, and are being offered with price guidance of between 80% and 79% of par, a rough 20% to 21% spread equivalent.

It’s good to see ARX Holdings and the Progressive Home companies returning to the cat bond market, to layer on more reinsurance from the capital market for 2024.

You can read all about this Bonanza Re Ltd. (Series 2023-2) catastrophe bond and every other cat bond ever issued in the Artemis Deal Directory.