Louisiana Citizens Property Insurance Corporation is back in the catastrophe bond market with what will be its fifth transaction, a $100 million Pelican IV Re Ltd. (Series 2018-1) cat bond which sees the insurer looking for reinsurance protection against multiple catastrophe perils for the first time.
The residual market property insurer for Louisiana first visited the cat bond market in 2012 with a $125 million Pelican Re Ltd. (Series 2012-1) deal, then returned in 2013 with the $140 million Pelican Re Ltd. (Series 2013-1), in 2015 with the $100 million Pelican III Re Ltd. (Series 2015-1) and most recently in 2017 with a $100 million Pelican IV Re Ltd. (Series 2017-1) transaction.
As the property insurer of last resort with considerable coastal exposure, Louisiana Citizens previous four cat bonds have all been focused on named storm and hurricane risks. But with its fifth cat bond the insurer is expanding the capital markets backed reinsurance coverage it benefits from, adding severe thunderstorm risks to this Pelican IV Re 2018-1 deal, we understand.
For its latest cat bond, Louisiana Citizens special purpose insurer (SPI) Pelican IV Re Ltd. will issue a single $100 million tranche of Series 2018-1 Class A notes, which will be sold to ILS investors with the proceeds used to collateralize a reinsurance agreement between it and the sponsor.
The $100 million of notes will cover the sponsor against losses from Louisiana named storms (so tropical storms and hurricanes) and also Louisiana severe thunderstorms, across a three-year term with both on a per-occurrence basis and using an indemnity trigger structure.
The notes will attach at $300 million of losses to Louisiana Citizens and cover it up to $400 million, which is a layer directly below the insurers Pelican IV Re 2017 cat bond. The Series 2018-1 Class A notes will have an initial attachment probability of 1.12% and an initial expected loss of 0.97%.
The Pelican IV Re 2018-1 notes are being offered to cat bond investors with coupon pricing guidance of 2.25% to 2.75%, we’re told.
When the 2017 Pelican IV Re notes were issued they attached at $350 million and priced at 2.25%, so it will be interesting to see where this new transaction from Louisiana Citizens prices for comparison, especially given they are also exposed to convective weather.
We understand that the targeted issuance date for this new Pelican cat bond from Louisiana Citizens is for before the end of April.
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