SageSure targets up to $200m Gateway Re 2024-1 cat bond for reciprocals

The SureChoice and Elevate reciprocal exchanges are set to benefit from additional named storm reinsurance protection via a new catastrophe bond, as coastal property managing general underwriter SageSure is back in the market with an up to $200 million Gateway Re Ltd. (Series 2024-1) issuance.

SageSure has been bolstering its reinsurance capacity using the appetite of capital market investors, through a series of Gateway named catastrophe bonds since May 2022.

Since that time the MGU has seen three Gateway Re Ltd. issuances that protect its reciprocal change underwriting vehicles, the $150m Gateway Re Ltd. (Series 2022-1), the $355m Gateway Re Ltd. (Series 2023-1), the $100m Gateway Re Ltd. (Series 2023-2), as well as one $125m Gateway Re II Ltd. (Series 2023-1) issuance for two other SageSure-linked carriers, and most recently a $50 million county-weighted retro cat bond in Gateway Re Ltd. (Series 2023-3).

Now, the company is back seeking more collateralized named storm reinsurance for its SureChoice Underwriters Reciprocal Exchange and the Elevate Reciprocal Exchange, two of the SageSure linked entities.

We understand that Gateway Re Ltd., a Bermuda domiciled SPI, will issue two tranches of Series 2024-1 cat bond notes, with a target for between $100 million and $200 million of reinsurance across the two layers.

These notes will be sold to catastrophe bond funds and investors, while the proceeds will be used to collateralize reinsurance agreements between the SPI and the ceding entities which are the SureChoice Underwriters Reciprocal Exchange and the Elevate Reciprocal Exchange.

The two tranches of Series 2024-1 notes issued by Gateway Re Ltd. will cover the reciprocals against losses from named storms affecting the US states of Alabama, North and South Carolina, Louisiana, Mississippi, and Texas.

We’re also told that at a reset, additional states of New York and Virgina can be added, at the cedents request.

The notes will provide the cedents with indemnity trigger and per-occurrence structured named storm reinsurance, with one tranche providing one wind season of protection, the other offering the reciprocal exchanges three seasons of coverage.

The two tranches of notes are targeted to secure at least $50 million of coverage each, but the entire issuance targets between $100 million and $200 million in reinsurance, we understand.

The first Class AA tranche of notes will run up to a due date of July 8th 2027 we understand, and their reinsurance would attach at $1.22 billion of losses, exhausting at $1.35 billion.

Which gives the Class AA notes an initial attachment probability of 1.19%, an initial expected loss of 1.1%, while they are being offered to cat bond investors with spread guidance in a range from 6.25% to 7%, we are told.

The second Class A tranche of notes will only provide reinsurance for a single wind season, running to December 23rd 2024, with their coverage attaching at $535 million of losses and exhausting at $715 million.

The Class A notes have an initial attachment probability of 1.91%, an initial expected loss of 1.47%, but are structured as zero-coupon bonds and offered to cat bond investors with price guidance in a range from 90.75% to 91.75% of par (representing a rough spread equivalent of 8.25% to 9.25%).

It’s good to see SageSure and its underwriting entities back in the catastrophe bond market and looking to expand their capital markets backed reinsurance.