Ursa Re Ltd. (Series 2017-2)

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Ursa Re Ltd. (Series 2017-2) - At a glance:

  • Issuer / SPV: Ursa Re Ltd. (Series 2017-2)
  • Cedent / Sponsor: California Earthquake Authority
  • Placement / structuring agent/s: Swiss Re Capital Markets is sole structuring agent and joint bookrunner. Aon Securities is joint bookrunner.
  • Risk modelling / calculation agents etc: EQECAT
  • Risks / Perils covered: California earthquake
  • Size: $400m
  • Trigger type: Indemnity
  • Ratings: NR
  • Date of issue: Nov 2017

Ursa Re Ltd. (Series 2017-2) - Full details

In its latest catastrophe bond, the California Earthquake Authority (CEA) returns with its Ursa Re Ltd. vehicle, which will be issuing two tranches of Series 2017-2 notes, we understand, in order to collateralize reinsurance agreements that will provide the CEA with a three-year source of reinsurance from the capital markets, to protect it against losses due to earthquakes in California.

The notes will provide annual aggregate reinsurance protection to the sponsor and feature an indemnity trigger, while the protection will run for a three-year term.

The first tranche of notes being marketed to catastrophe bond investors is a $200 million Class C layer, that will provide the CEA with protection for losses across a $400 million layer from $4.626 billion of losses up.

The Class C notes have an initial attachment probability of 1.39% and an expected loss of 1.32% and are being offered to investors with price guidance in a range from 3.5% to 4.25%, we’re told.

The second tranche is a $200 million Class D layer, which will cover a $500 million layer of risk for the CEA, from $2.195 billion and up. Hence these are the riskier of the two tranches, attaching first.

The Class D notes have an initial attachment probability of 3.05%, an expected loss of 2.79% and are offered to investors with price guidance of 5% to 5.75%, we understand.

These two tranches are the C and D notes from the Ursa Re Program Notes, a set of six cat bond tranches, that were modelled in advance of the issuance of its 2017-1 transaction in May 2017. We understand that by having pre-modelled and structured these six tranches, the CEA has had a structure it can compare with traditional reinsurance and fit better into its program at the right point in the year.

With both the C and D tranches of notes covering a layer at least twice their current size, it looks like there is a significant chance that the CEA will increase the size of the issuance if investor demand allows it to. The pricing looks roughly aligned with its most recent issuance, likely also a benefit of having modelled these notes in advance.




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