Citrus Re Ltd. (Series 2017-1)

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Citrus Re Ltd. (Series 2017-1) - At a glance:

  • Issuer / SPV: Citrus Re Ltd. (Series 2017-1)
  • Cedent / Sponsor: Heritage Property and Casualty Insurance Co.
  • Placement / structuring agent/s: Aon Securities is sole structuring agent & bookrunner
  • Risk modelling / calculation agents etc: AIR Worldwide
  • Risks / Perils covered: U.S. named storms
  • Size: $125m
  • Trigger type: Indemnity
  • Ratings: NR
  • Date of issue: Mar 2017

Citrus Re Ltd. (Series 2017-1) - Full details

This is Heritage Property & Casualty Insurance Company's fifth catastrophe bond issuance under the Citrus Re name.

Heritage is looking for fully collateralized U.S. named storm reinsurance protection from ILS investors, initially covering its four main states of operation, Florida, Georgia, South and North Carolina.

The transaction is initially offering $125 million of rule 144A notes to investors in a single Class A tranche.

Heritage is seeking reinsurance coverage from the capital markets on a per-occurrence basis over a three-year risk period with this Citrus Re 2017-1 issuance, while losses to the investors in the notes will be tied to an indemnity trigger, so based on Heritage’s claims experience on subject personal and commercial residential business due to named storm losses in the covered area.

We are told that the Citrus Re 2017-1 Class A notes will have an attachment point at $40 million, covering $125 million of losses up to an exhaustion point at $165 million. That doesn’t leave room for upsizing, however Heritage has been seen to follow up very quickly with additional cat bond issues before if market conditions prove conducive.

The Class A notes have an attachment probability of 5.33% and an expected loss of 3.08%. The $125 million of Citrus Re 2017-1 notes are being offered to investors with coupon guidance in a range from 6.5% to 7.25%

Update 1:

The price guidance for the Citrus Re 2017-1 notes fell during the marketing period, as investor demand helped to make this deal increasingly efficient for sponsor Heritage.

The coupon price guidance range was lowered to 6% to 6.5%, so below the bottom end of the launch range.

Update 2:

In a clear sign of the burgeoning demand for cat bond investments, we’re told that the price guidance has been updated again, now at the bottom of the already reduced range, offering investors a coupon of 6%.

Based on the expected loss of 3.08%, the $125 million Citrus Re 2017-1 Class A notes will pay investors a multiple of 1.95 times the EL.




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