USAA could double its 40th Residential Re cat bond to $400m in size

USAA, the primary military mutual insurance company, could double the targeted size of its 40th catastrophe bond under the Residential Re name, now seeking up to $400 million in multi-peril reinsurance protection from the Residential Reinsurance 2023 Limited (Series 2023-1) issuance.

As we reported earlier this month, USAA returned to the cat bond market targeting at least $200 million of fully-collateralized multi-peril catastrophe reinsurance on an indemnity and annual aggregate basis.

Its first catastrophe bond of 2023 will actually be the 40th under the Residential Re program of deals, although the carrier has now sponsored 40 issuances under the Residential Re naming convention and one under Espada Re, all of which are listed in our Deal Directory.

With this Residential Reinsurance 2023 Limited Series 2023-1 cat bond, USAA is targeting indemnity and annual aggregate reinsurance protection against losses from the perils of U.S. tropical cyclones, earthquakes (plus fire following), severe thunderstorm, winter storm, wildfire, volcanic eruption, meteorite impact, other perils (all including auto & renter policy flood losses) across a four-year term.

At its launch to investors, the Residential Re 2023-1 cat bond was targeting $200 million of reinsurance coverage from the capital markets for USAA, but we’re now told that target has been lifted to between $300 million and $400 million, so a potential doubling in size.

A tranche of Class 13 notes had a preliminary size of $75 million, but the target has now been lifted to between $100 million and $125 million of protection for USAA.

The Class 13 notes have an initial base expected loss of 2.11% and were first offered with price guidance in a range from 10% to 10.75%, but this has now been narrowed to guidance of 10% to 10.5%, we understand.

A tranche of Class 14 notes launched with a preliminary size of $125 million, but this target is now for between $200 million and $275 million of cover for USAA.

The Class 14 notes have an initial base expected loss of 0.75% and were first offered with price guidance in a range from 6.75% to 7.25%, but this has now also narrowed to a range of 6.5% to 6.75%, so could price at or below the low-end of initial guidance, we’re told.

Once again this looks set to be a strong new cat bond sponsorship experience for long-standing cat bond market veteran USAA.

You can read all about this new Residential Reinsurance 2023 Limited (Series 2023-1) catastrophe bond issuance from USAA, as well as every other cat bond issued in our extensive Deal Directory.