The California Earthquake Authority’s latest visit to the catastrophe bond market for the issuance of Ursa Re Ltd. (Series 2015-1), has been well-received by investors, with the cat bond set to grow in size by two-thirds to $250m, while the pricing has settled at the top-end of guidance.
The CEA’s latest cat bond launched earlier this month, with the Ursa Re 2015-1 issuance targeting at least $150m of fully-collateralized capital markets backed reinsurance protection from earthquakes for the insurer.
The Ursa Re 2015-1 cat bond features an indemnity trigger, with reinsurance protection afforded on an annual aggregate basis to the CEA. The transaction will have a three-year term, running until mid-September 2018.
According to sources, the ILS investor community was pleased to see the CEA back in the market and the response has helped the transaction upsize. The latest information we have is that the cat bond is set to complete this week at $250m in size.
At the same time as growing in size, investors did once again show that they are not prepared to allocate capital to catastrophe risks at any cost. Demonstrating discipline and a desire to maintain a certain level of return, the bond is said to have now priced with a coupon of 5%, the top-end of the marketed 4.75% to 5% range.
With the single tranche of Series 2015-1 notes being issued by Ursa Re having a 2.62% expected loss, the pricing results in a multiple of 1.91 times the expected loss at the 5% coupon.
It remains encouraging that investors appear to know where their limits, in terms of return requirements, lie. The majority of catastrophe bonds in recent months have priced at or above the mid-point of guidance, as the market continues to display pricing discipline.
The Ursa Re 2015-1 cat bond transaction is set to complete this week.
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