Bonanza Re Ltd. (Series 2025-1)

This will be the ninth catastrophe bond issuance under the Bonanza Re Ltd. series of deals and the transaction sees US insurer Progressive seeking a one-year source of annual aggregate multi-peril reinsurance protection from the capital markets, we understand.

Bermuda based special purpose insurer Bonanza Re Ltd. will issue a single tranche of Series 2025-1 Class A discount zero-coupon cat bond notes, with the proceeds from their sale used to collateralize a single-year reinsurance arrangement for the Progressive insurance companies.

The initial target for Progressive is to secure $70 million or more in indemnity triggered, annual aggregate US focused reinsurance from the capital markets from this Bonanza Re 2025-1 cat bond deal.

The Bonanza Re 2025-1 cat bond will provide the insurer with one year of aggregate reinsurance covering qualifying losses from the perils of named storm, earthquake (fire-following only), severe thunderstorm, winter storm and wildfire across the United States, with this coverage running across calendar year 2026, we understand.

The currently $70 million of Series 2025-1 Class A notes that Bonanza Re Ltd. is offering would attach their coverage at $550 million of qualifying losses and exhaust coverage at $750 million, while we are told that there is a per-event deductible of $20 million and an event cap of $280 million, under the terms of the aggregate reinsurance agreement.

Which effectively means the notes could attach on two larger qualifying events that exceed the per-event cap, but only just.

The notes will have an initial attachment probability of 9.42%, an initial expected loss of 5.53% and are being offered with price guidance in a range from 80% to 82% of par (being zero-coupon in nature), sources said, a very rough spread equivalent of 18% to 20%.

Update 1:

Progressive is now aiming to upsize this new aggregate catastrophe bond to provide it $100 million of reinsurance.

The notes are now being offered with guidance for pricing at between 82% and 84% of par, so a reduction on the initial range.

Update 2:

We’re told that Progressive’s target for its new aggregate catastrophe bond was raised a second time, with the goal now to secure $125 million of reinsurance.

The notes are now being offered with guidance for pricing at 84% of par, so a further reduction and at the bottom of the revised range.

Update 3:

Progressive secured its new aggregate Bonanza Re Ltd. Series 2025-1 cat bond to provide the upsized $125m of reinsurance.

The zero-coupon discount notes priced at 84% of par, so the low-end of revised guidance.