Bonanza Re Ltd. (Series 2023-2)

This will be the seventh catastrophe bond in the Bonanza Re Ltd. series of deals that at first covered the risks of American Strategic Insurance Group, but in recent year’s have expanded to include others of the carriers of the Progressive-owned ARX Holding Corporation.

It is actually be the eighth catastrophe bond to provide reinsurance to insurer American Strategic, as the company had the Gator Re cat bond back in 2014, before the Bonanza Re series began.

With this new Series 2023-2 cat bond, Bermuda domiciled special purpose insurer Bonanza Re Ltd. will issue a single tranche of zero-coupon notes to provide collateralized reinsurance for the Progressive insurance companies (we understand known as Progressive Home).

The issuance is targeted at $50 million in size, we’re told, to provide a source of indemnity based annual aggregate reinsurance to the sponsor, against losses from the perils of US named storms, earthquakes, severe thunderstorms, winter storm, and wildfires.

We’re told the notes have a two section approach to coverage, with an attachment at $425 million for named storm events and $525 million for all other perils, which perhaps also helps this serve as a peak peril cover with more utility for ARX Holdings and the Progressive Home companies. The notes will cover the ARX Holding insurers, including American Strategic.

The $50 million tranche of Class A zero-coupon notes come with an initial attachment probability of 3.3%, an initial expected loss of 2.28%, and are being offered with price guidance of between 80% and 79% of par, a rough 20% to 21% spread equivalent.

Update 1:

We understand the target size for this cat bond has now been lifted to between $60 million and $70 million for ARX Holding.

At the same time, we’re told the offering price guidance has now been fixed at 77% of par, which reflects a rough 23% spread and so has risen from the initial guidance range these zero-coupon cat bond notes were marketed with.

Update 2:

We’re now told that this cat bond has been priced to provide the enlarged $70 million of reinsurance, so the issuance grew 40% while being marketed.

The pricing settled at the raised 77% of par level, we’re told.