The latest catastrophe bond to be sponsored by the California Earthquake Authority (CEA), the Ursa Re Ltd. (Series 2018-1) transaction, is set to achieve the upper-end of the targeted size at $250 million, while pricing has now been fixed at just below the mid-point of initial guidance.
The CEA returned to the cat bond market with the Ursa Re 2018-1 cat bond in August, targeting up to $250 million of collateralized reinsurance coverage from the issuance to replace a cat bond that matures on September 15th.
Catastrophe bonds now play a significant role in the CEA’s growing reinsurance protection, as it now has $2.075 billion of catastrophe bond risk capital outstanding (according to Artemis’ data), making the Authority one of the largest users of the capital markets for its reinsurance protection in the world, in a securitised and 144A form.
This new Ursa Re 2018-1 cat bond launched with the CEA targeting between $200 million and $250 million of reinsurance protection, to replace the Ursa Re 2015-1 cat bond that is scheduled to mature this month.
The $250 million was secured, we understand and the transaction also priced more keenly than initial guidance had suggested.
The single tranche of Class D notes being sold to investors will collateralize and provide annual aggregate reinsurance protection to the CEA, on an indemnity trigger basis, with protection running to September 2021.
The cat bond will cover the CEA for losses across a $500 million layer of its reinsurance program, from $2.521 billion of losses upwards and the single tranche of Class D notes have an expected loss of 2.87%.
The notes were initially priced with guidance of 4.9% to 5.4%, which subsequently tightened to a range of 5% to 5.25% and has now been fixed at 5.1%, so just below the mid-point of starting price guidance.
So as one transaction roles off to maturity the CEA has successfully replaced it with a new one, maintaining its transformer supported and capital markets backed reinsurance protection.
The Ursa Re Ltd. (Series 2018-1) cat bond transaction will complete at the end of this week and you can read about this and every other catastrophe bond since the market began in the Artemis Deal Directory.