Blue Ridge Re Ltd. (Series 2023-1)

This Blue Ridge Re catastrophe bond sees another new first-time sponsor entering the cat bond market, as the North Carolina Farm Bureau seeks reinsurance from the capital markets for its underwriting entities.

A new Bermuda based vehicle named Blue Ridge Re Ltd. was actually registered roughly a year ago, but only now coming to market with the first cat bond for the North Carolina Farm Bureau, which suggests the organisation may have opted to sit out the higher pricing we saw in the cat bond market a year ago.

Blue Ridge Re Ltd. is targeted to issue two tranches of Series 2023-1 catastrophe bond notes, with each set to provide named storm reinsurance for the state of North Carolina to North Carolina Farm Bureau Insurance Company and Farm Bureau Insurance of North Carolina, the two underwriting entities of the organisation, we understand.

The target is to secure at least $250 million of reinsurance through this Blue Ridge Re 2023-1 cat bond deal, with Hannover Re set to act as the ceding reinsurer, entering into a retrocession agreement with the issuer, and then passing on the reinsurance protection to the NC Farm Bureau insurers, sources said.

The North Carolina named storm reinsurance protection will be provided on an indemnity trigger and per-occurrence basis, while the coverage will run from January 1st 2024 to the end of 2026, so three full calendar years.

A Series 2023-1 Class A tranche of notes are preliminarily sized at $125 million, we’re told, and will cover a share of losses from an attachment point of $1bn to exhaustion at $1.6bn, giving them an initial attachment probability of 1.32%, an expected loss of 0.98% and the notes are being offered with price guidance of a 5% to 5.5% spread.

A similarly $125 million sized Class B tranche of notes will cover a share of losses from an attachment point of $500m to exhaustion at $1bn, giving them an initial attachment probability of 2.81%, an expected loss of 1.91% and these notes are being offered with price guidance ranging from a 7.5% to 8% spread, we have learned.

The layers of the NC Farm Bureau’s reinsurance tower where these cat bond tranches will sit are wide, suggesting there is room for some upsizing should investor appetite prove strong and pricing conducive.

Update 1:

We understand that the target size has been lifted to $400 million, with the two tranches both increasing to $200 million each.

The Class A tranche now has price guidance of 5.25% to 5.5%, so these notes look set to price in the upper-half of guidance.

The Class B tranche has had its spread guidance fixed at 8%, so the top-end of the initial range on offer.

Update 2:

This Blue Ridge Re 2023-1 cat bond issuance was finalised at the raised target size of $400 million, while the spread was priced at 5.25% for the Class A notes and 8% for the Class B notes, with each tranche remaining sized at $200 million each.