Citrus Re cat bond prices at low-end of reduced range

by Artemis on April 11, 2014

The $150m Citrus Re Ltd. (Series 2014-1) catastrophe bond, sponsored by Florida Citizens takeout insurer and first time cat bond sponsor Heritage Property and Casualty Insurance, has priced right at the low-end of a reduced coupon range.

Earlier this week we reported that the Citrus Re cat bond had grown by 50%, from the $100m it launched at, to offer investors $150m of notes. At the same time the interest spread guidance had been lowered and tightened from the initial range of 4.75% to 5.5% above the yield of the collateral investments, down to a range of 4.25% to 4.75%.

Sources tell Artemis that at final pricing the Citrus Re cat bond priced at the bottom of that reduced range, offering investors an interest coupon of 4.25%. This represents a drop in pricing of over 17%, if you take the mid-point of the originally marketed range or as much as 23% from the top of that initial range.

Another sign of pricing movement to come at the Florida focused June reinsurance renewals? Perhaps, at least it shows that Q2 cat bonds are likely to follow the example set on pricing by the transactions completed in Q1.

For Heritage Property & Casualty Insurance the price decline will represent real savings on its reinsurance program for 2014 and provide a great example of the value of risk transfer through catastrophe bonds.

The Citrus Re catastrophe bond is expected to complete next week. You can find full details on Citrus Re Ltd. (Series 2014-1) in the Artemis Deal Directory.

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